More than five hundred years ago, clans of dwarves and gnomes made an agreement known as the Phandelver's Pact, by which they would share a rich mine in a wondrous cavern known as Wave Echo Cave. In addition to its mineral wealth, the mine was rumored to have contained great magical power. Human spellcasters allied themselves with the dwarves and gnomes to channel and bind that energy into a great forge, where magic items could be crafted. Times were good, and the nearby human town of Phandalin prospered as well. But then disaster struck when orcs swept through the North and laid waste to all in their path.
A powerful force of orcs reinforced by evil mercenary spellcasters attacked Wave Echo Cave to seize it's riches and magic treasures. Human wizards fought alongside their dwarf and gnome allies to defend the forge, and the ensuing spell battle destroyed much of the cavern. Few survived the cave-ins and tremors, and the location of Wave Echo Cave was lost.
For centuries, rumors of buried riches have attracted treasure seekers and opportunists to the area around Phandalin, but no one has ever succeeded in locating the lost mine. In recent years, people have resettled the area. Phandalin is now a rough-and-tumble frontier town.