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Crafting is done through Merchants.
Ores and Mob Drops can be used to craft Ingots or Dust.
Then these materials can be used to craft new types of armors and weapons.
You can craft Silver Weapons and Copper, Cobalt, Rubysilver, and Gold Armors.
For craftable list for each trader go to their individual page. (Example. Leathersmith)
For craftable list from an ingredient go to their individual page. (Example. Bone)
Some crafts are only unlocked after completing particular Quests. (specifics unknown)