Jump back into the Buggy as you will need it to cross an upcoming river. You cannot reach Nibelheim on foot!
Use the map below to help you navigate to Nibelheim as well as the screenshots below the map.
Head west away from Cosmo Canyon and then turn north. Cross the river with the Buggy and then you will find the town perched just in front of the grey-ish mountains.
The story will continue as soon as you take a few steps into town. Enter the doorway directly north of the entrance which leads to the Nibelheim Inn.
You can choose to rest at the Inn or have the man “tell you his story” which is inconsistent with Cloud’s memories. There is a man in a black cape in the kitchen area behind the counter. Speak to him to receive a 
Luck Source.
Enter the Nibelheim Item Store which is the house directly to the right of the Inn. You can purchase the following items:
Potions
Hi-Potions
Phoenix Downs
Tents
There is another man in a black cape up near the stove. Speak to him to receive a free Elixir.
Enter Tifa’s house. The next house to the right of the Nibelheim Item Store is Cloud’s House. Tifa’s is the one to the right of that.
The man in the black cape at the front of the house will not give you anything but there is also one in the back. Speak to that man to receive a Turbo Ether.
There is also a man in a black cape upstairs who will give you a 
Platinum Fist which is an interesting weapon for Tifa. It has double Materia growth but no Materia pairing and lackluster attack power. In other words, its helpful for leveling up your Materia but not much else.
The last house to the right of Tifa’s House, which is just referred to as the “Nibelheim House” in the menu screen, has two more men in black capes upstairs. Speak to one of them to receive a Luck Source.
Make your way back to the Shinra Mansion after you have obtained all of the items listed above.
It is important to note that entering the Shinra Mansion at this point is optional, but there are several things you should pick up while you are here, including an optional character named Vincent.
Also, there is an enemy in the Shinra Mansion called a Jersey that looks like a set of scales shown in the screenshot below. These enemies can use a move called ‘????’ which can be learned using your 
Enemy Skill Materia.
Jerseys are a fairly rare enemy but they tend to appear in the rooms on the second floor of the Shinra Mansion.
This move does damage equal to the character’s maximum HP minus their current HP to the target when cast. In other words, the lower the caster’s HP the higher the damage that ‘????’ will do.
Go through the northernmost doorway at the very back of the room and then go right. There is a treasure chest in the room to the north that contains a 
Twin Viper which is a fairly strong weapon for Yuffie that also provides double Materia growth rate.
Go through the doorway to the right of the staircase on the main floor again to grab the other chest that you could see just to the south. This one contains a 
Silver M-phone weapon for Cait Sith.
Go back out to the entryway and climb the stairs up to the second floor. Take a left at the top of the stairs and continue forward to find another treasure chest with an 
Enemy Launcher weapon for Barret.
Go back to the top of the stairs and go right to find one last treasure chest that contains a Magic Source.
Travel back down to the library where Cloud met up with Sephiroth during the flashback scene. Sephiroth can be found in the library again.
He will tell you where he is headed and then make a hasty exit but not before throwing a piece of 
Destruct Materia at Cloud. Pick up the Materia and head back up to the main floor.
The last thing you should take care of is obtaining Vincent, the second and last optional character that you can add to your team. But make sure that you save first before attempting the next steps!
Check out the Secret / Optional Characters section of this strategy guide for more information using the link below:
It is now time to begin your ascent up Mount Nibel. Walk towards the back of Nibelheim and follow the trail to the right of the Shinra Mansion just like you did before with Sephiroth in the Kalm flashback. Follow the trail out to the World Map and into the cave at the end of the pathway.
The pathway through Mount Nibel is fairly straightforward. Follow it along until it splits with one path going north.
Follow that winding pathway up to the top of the peak to find a treasure chest that contains a 
Rune Blade. This is a great weapon for Cloud that has double Materia growth rate and fairly strong attack power.
Just before the rope bridge is another section of pathway that leads northward. Follow that pathway along to find a treasure chest that contains a 
Plus Barrette for Red XIII.
Continue across the rope bridge and you will reach a cave with five pipes shown in the screenshot below.
Do not slide down any of the pipes yet! The steps followed in this section of the game need to be completed in a very specific order. Be careful not too get too far ahead and don’t slide down the pipes too early!
Go down the stairs and down the ladder to the lower platform and you will see a ladder that is stuck in the upright position.
Have Cloud begin to climb down this ladder and it will automatically drop allowing you to climb back up to the top of this cave and slide down as many of the pipes as you would like.
You may run into a Green Dragon enemy in this area. You can steal 
Gold Armlets from these dragons which are very powerful pieces of armor (and are better than anything you currently have). Make sure you take the opportunity to steal from them each time you encounter them and before you defeat them.
Green Dragon’s can also teach you the Flame Thrower Enemy Skill for your Enemy Skill Materia if you have not learned it yet on either of them.
Before you jump into any of the pipes, take the doorway to the left of the ladder that you pushed down. This pathway will lead directly to the Nibel Reactor.
Follow the pathway leading away from the reactor all the way down to the cave below.
Enter the cave and on the north wall you will find a treasure chest that contains a 
Sniper CR which is a new weapon for Vincent.
Proceed to the bottom left side of the cave and go through the opening. This pathway leads to the Materia Fountain that Sephiroth, Tifa and Cloud had come across during the flashback sequence.
Enough time has now passed and a piece of Materia has been created. Pick up the 
Elemental Materia sitting on the ground. You must now travel all the way back to the room with the 5 pipes.
Each of the pipes at the top of this room has a number written on it. They read from 5 to 1 in descending order (5 is the one on the left).
Slide down pipe (2) and pick up the Powersoul weapon for Tifa sitting on top of the rock.
The Powersoul is very similar to the Platinum Fist. It offers double Materia growth rate, though it has less attack power than Platinum Fist. To compensate for this it will “power up” when Tifa is “near death”. You can tell when a character is “near death” when their character HP bar turns yellow on the screen.
Unfortunately this mechanic makes the Powersoul a poor weapon choice for Tifa other than for very specific circumstances and tactics.
Make sure you ignore the large scorpion at the bottom-right side of the screen (Materia Keeper) as that is an upcoming boss fight that you will want to prepare for.
Climb all of the ladders back to the top level and then go down pipe (4) to find a treasure chest that contains an All Materia.
Try to continue leveling up and equipping all of your All Materia even if you are not actively pairing them with other Materia if you have the space for it in your armor or weapons.
Fully leveled up All Materia (Mastered) sells for a large amount of gil later on in the game and is a great way to earn gil without cheating.
All of the other pipes lead to dead ends. Save your game at the 
Save Point near the scorpion and prepare for your next boss battle.
HP: 8,400
Reward: 
Gem Ring
The Materia Keeper’s hardest hitting attack is called Trine. It does around 500 damage to all of your party members. You can also learn it with your Enemy Skill Materia so make sure that you have both of them equipped and that you don’t end the fight before learning it (which should not be a problem).
This boss is susceptible to the Poison status effect so make sure that you use Bio from your Poison Materia early on in the fight.
Materia Keeper absorbs and is healed by Fire-based spells so be sure to stay away from them. This includes using Vincent’s Limit Break, Galian Beast, which will sometimes use fire magic.
A video demonstration of this battle is included below for reference:
Materia Keeper will drop a 
Counter Attack Materia after the fight which is arguably one of the best Materia in the game. A great combination is to equip Counter Attack Materia and Cover Materia on the same character (Cloud is recommended).
Save your game one more time at the Save Point and then exit the cave. Go around the corner to come out on the other side of the mountains, still referred to as the Nibel Area on the menu screen.
The next stop is Rocket Town which can be found north of the area where you emerge from the cave (and is shown in the screenshot below).
