After you receive the dynamite at the beginning of the game in the cave to the north of
the crash site and reach Shrouded Hills, go to the blacksmith's shop. Wait until he goes
to sleep. Follow him into his room, and make sure Nijel stays outside near the anvil. 
Save the game. Pick pocket the room key from the blacksmith. If you fail, reload the game.
You can do this with 0 Pickpocketing skill because he is asleep. Then, place the dynamite 
near his bed and run out the door near the anvil. When it explodes killing him and breaking
open the barrel of his wares, take anything needed such as armor, weapons, or bullets, and
the blacksmith's hammer. Note: Make sure to rest in the blacksmith's room for 24 hours or 
the guards will kill you.