Blacksmithing is a Skill that allows you to forge new equipment for your character as well as use Repair Kits more efficiently.
Weapons and Armor lose durability when used and eventually require repair. Weapons and armor provide the same damage/protection regardless of current durability until they break completely (durability drops to zero). Repairing equipment at NPCs costs gold, and the price increases the worse condition the item is in. Repair Kits can be bought for under 100 gold at various blacksmithies and used to fully repair an item no matter the condition, making them a much better investment. While relatively cheap, Repair Kits are best saved for high-quality items which might require lots of gold to be repaired by NPCs, or for repairs in the field when returning to an NPC is not possible.
The first milestone in Blacksmithing unlocks the option to find materials on certain animals, and additional components can be salvaged from weapons or armor. At level 3 infrequent items can be salvaged and level 6 unlocks rare items. Unique (non-dlc) may some times be salvaged.
To create an item a "core" component is needed along with a second component and up to two additional components. At level 7, gems can be infused into equipment during creation (they are not removable once used). Once all the components are selected, the overall quality of the item and its damage/armor will be calculated based on the components and gems used as well as the player character's level. Item requirements are calculated once the crafting is finished.
The following sections present the various pieces of data related to blacksmithing, or an alternative presentation in the form of a spreadsheet can be found here.
Mastercraft is obtained through the very last skill of blacksmithing. The bonus effect type depends on the core component, and the strength of the bonus depends on the tier of the core. The bonus is independent of class (finesse, might, sorcery) or quality (i.e. is the same for Infrequent and Rare crafted items).
The following table gives a list of items and their mastercraft bonuses.