Dawn of Light

So I have been scouring Cornwall to get past the first step for the quest Tools of the trade to get the Horadric Malus. I have cleaned out both zones the catacombs of cardova and The Forgotten Tower. I haven't seen any such mob or npc to advance the quest. Am I doing something wrong? I have 3 characters at lvl 45 so if it's a mob I need to kill it's likely going to be grey to me and no chance of loot I am guessing? Anyways, some advice would be great. I have searched a bit on the forums and I am sure I have missed a post someplace, if so then sorry for a repeat post as this.

It's in the dungeon sitting on the ground, you just click (left or right click I can't remember) to pick it up.

Once you have defeated The Smith, you can pick up the hammer lying on the floor next to the anvil.