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You can see the grade of equipment in the lower left corner

In order to begin this sidequest, you need to be on Night at the Library and have completed 012 Fai Do, the Downbeat Armorer and 004 A Favor for Nu Bi. Once you’ve done that, head to Evermore and enter the actual town to see that Fai Do has a quest for you. He wants you to make an Iron Armor with a grade of at least five. Grade is the number in the lower left corner of the stats screen on equipment. To make Iron Armor, you need to research Level 1 Armor Development at the Outfitters and the items required are 2 Iron Nuggets, 3 Shabby Leathers, and 2 Simple Strings.

Iron Armor starts out with a grade of two and in order to increase that, you’ll need to add catalysts to it. A single catalyst will add a grade to it and in the case of Iron Armor, you will need Copper Nuggets (you should have quite a few of these). You simply need to add three Copper Nuggets to reach a grade of five, so do that and create the armor. When you’ve done that, speak to Fai Do again in town to show him the armor and finish the quest.