The Heavenly Forge was a machine created by the Ancients to create items. It is mentioned in Might and Magic VI: The Mandate of Heaven, and appears in the evil ending of Might and Magic VII: For Blood and Honor.
The Forges were used by the Colonial Government to create new and powerful artifacts, but after the Silence, the absence of the Ancients caused the Forges to slowly break down. The last Forge stopped working in 113 AS.
Kastore and the other dark advisors wanted to rebuild the Forge on Enroth and duplicate the weapons they had brought with them, giving them the power they needed to crush all resistance. However, Resurrectra and their team managed to get the items they needed first, and used them to reactivate one of the gates of the Ancients, which led them to Webstation Beta-5.
Originally, the evil ending of the game (where Kastore rebuilds the Forge) was meant to be the canonical one, and the Heavenly Forge would be used to equip the (appropriately named) Forge faction in Heroes of Might and Magic III: Armageddon's Blade. However, fan outcry to the idea of adding science fiction elements to the Heroes series caused the Forge faction and the associated lore to be scrapped, the Conflux faction was created instead, and the good ending of Might and Magic VII was established as canonical.