Blue Mountain Dwarves

[yavanna II]

Yes, they were. Then the survivors migrated to Khazad-Dum.... or to other Dwarvish cities, since Khazad-Dum was the mansion of the Longbeards, of Durin's Folk. The Dwarves that lived in the Ered Luin during Frodo and Bilbo's time were Durin's Folk, or at least their survivors.

The Dwarves delved too greedily and too deep... You know what they awoke... shadow and flame.

That's from the first movie, stated by Saruman to Gandalf; and it's pretty accurate. THe Dwarves were attacked by Durin's Bane, a Balrog of Morgoth, and the Orcs that Sauron sent. So these Longbeards, led by Thorin's grandfather Thror, founded the Kingdom under the Mountain, and was so rich that it was soon assailed by the dragon Smaug. They escaped to the Blue Mountains and lived a poor life as coal miners...