The materials were transported from Eternal Kingdom.
Some of the materials were from the excavation of ores by Eternal Kingdom's gamers, which consisted partly of Adamantine rocks. The remaining portions were forging ores from Winterfell's material reward for defeating Samael.
The Dwarves, Hill and The King, were in charge of teaching steam technology and the forging of weapons.
Steam engineering wasn't developed in Victoria City yet, but Hill was kept busy, especially during the initial development stage.
The Blacksmith Shop was in 100% production, and the sounds of hammering filled the entire shop. As for the forging of weapons, Mana was required in both the Underworld and the Surface World.
Though Hill was a Steam Engineer, he was also skilled at forging. During these extraordinary circumstances, as well as for the overtime pay, Hill was working diligently.