Press 'S' and click 'Action' icon. Double click 'Compound' icon to open the Item Compounding window.

Place the item on the slot to compound and select the item you wish to construct. You can mouse over the items to see the details. The required materials in constructing the item you selected will also appear in the window. Once you have all the materials needed, just click 'Compounding' to start creating the item.

Molders can be found from monsters or create them by using the required materials. The higher the rank of material, the higher level equipments or weapons you can make.

Metal and Ores are used for heavy armors, leathers are used for light armors while fabric and cloth are for making robes.

Not all items can be compounded. Point your mouse over the item to know if the item can be compounded. 'Compounding available' should be indicated at the bottom of the item details.