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How they reproduce I don't know, for the first dwarves were Seven Fathers, but I guess threads can be found about that subject.
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As I understand it, from what I've read (though I can't remember where; I think the Barrow-wight or someone of high authority on the Downs said it) that the first dwarves were the Seven Fathers, but there were three males, three females, and Durin. "Seven Fathers" is a very misleading terminology.