You will see a dragon skeleton and a number of Excavation Points around the area. Like Mining points, they may only last one or two attempts to dig up the item. The points move around this area, and there can be three excavation points up at any one time. You need to keep excavating using your Pickaxes until you get the Hardened Bone.
A down-in-the-dumps artisan, seemingly too disheartened to take action herself, needs you to retrieve supplies for weaponcrafting. The hardened bone harvestable in the area should serve to raise her spirits.