Every player will start out at level 1 Mining and level 1 Smithing. Any player that has a mining level of 1 will only be able to mine certain ore deposits. While mining you gain experience for your mining skill and eventually it will go up. The higher your mining skill the higher quality ore deposits you can mine. For instance, a player with a level 1 Mining skill can only mine a copper ore deposit, however, once they reach level 5 or so they can then mine an iron deposit. I know of a couple of games that already use a method like this so obviously it works.

Like those other games, this mining action should be done automatically. Just go up to an ore deposit click "Mine" and away you go. It should be set up to where every so often (like every 3 seconds or so) you have a chance to gain an ore. The higher the quality the ore the longer it takes to gain one. For example, every 3 seconds you would have a 50% chance to gain a copper ore, however for an iron ore it should be something like for every 4 seconds you have a 40% chance to gain an ore.

In addition, there should be a chance to gain some junk ore instead of the ore you are mining for, just to make things a little more difficult. However, the higher your mining level the less often this will happen. Also, at least with the higher quality ore, there should be a small chance to obtain a "Crystal" or "Gem" which would go along well with my idea about item attributes and such (for those of you that read that post )

Now, while the mining process is done automatically the player will still need to keep an eye on their backpack so it doesn't get full, if the backpack gets full then you will stop mining. Ore can also be stacked to a certain extent, (perhaps 10 ores to a slot) so that your backpack won't fill up too quickly. 

Once you've had enough of mining or your backpack gets full and you don't want to waste any ore you can then use the ore to smith your own items. First there should be some sort of furnace that will allow you to smelt the ore into solid bars, then you will use either a blueprint or an item mold, which you would get from the Item Maker, basically you would create an item much as you do now but instead of spawning to your backpack (with lower quality items) or attaching it to a boss (for Rare items or higher) you would get a mold or blueprint. 

For Uncommon or lower quality items you could spawn a blueprint directly to your backpack and create your item from there. For Rare quality or higher items you would still need to attach the blueprint to a boss, however, instead of the boss being 10X the item level it could then be something like 5X the item level so it would be easier to raid. However, each blueprint would have a limited number of uses before it disappears, so you could only use the blueprint/mold 1 or 2 times.

Your smithing skill would work much in the same way as mining in that you can only smith higher quality items once your smithing skill reaches a certain level. Each time you attempt to smith an item your smithing exp will increase. I said "attempt" to smith an item because you are not always guaranteed to be successful in smithing. Low level smithers will fail a lot, but low quality items use less material so it won't be too much of a problem.

The amount of material needed to smith an item would depend on the items level, quality, and attributes. For instance, a junk key (possibly used for a quest) would only require 1 bar of copper, however a level 100 Rare Armor may require 100 Bars of Silver and 50 Bars of Gold. 

Now, while there should be a few official mining sites, there should also be the possibility for players to create their own mining areas using WB. It could be set up to where the quality of the ore determines how much it cost to place a deposit on your map and each deposit can only produce a certain amount of ores per day so it would be prudent to place several ore deposits on each map, especially if there are several people mining at once.

In addition, there could also be the possibility of dropping some of your ore if you are attacked while mining. Just to add a bit more thrill to pvp.

That's about it, hopefully I didn't leave anything out. Feel free to ask any questions or let me know if I need to clarify some point.