Mithril was indeed rare and probably found only in a few places in the world. But in the First Age the Dwarves traded much with the Elves and the Elves prized the weapons and armors made by the Dwarves. So it's very likely that a number of Elves, especially the royalty, wore armor made of Mithril.
It was also said in LotR that Mithril was very expensive and that the mail given to Bibl by Thorin was worth more that the Shire.
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