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In Appendix B, Elvish names for the Dwarves, Quendi Eldar, it is stated that elves hunted the petty dwarves, considering them to be strange animals, not Incarnates. Their later amazement is probably due to realising that the petty dwarves were of the same race with the more cultured great ones. Seeing their initial behaviour, they probably met these ousted dwarves firstly.
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