This quest is actually quite simple once you know where to go.
You need to deliver the Cigar to the Mountain Village. You can easily fast-travel there using your Map. Or if you do not have this location unlocked, you can walk the entire way from the Farming Village. (The Mountain Village is located at the top of the elevator that the Miner has you fix.)
Once you arrive in the Mountain Village, walk to the right until you find this guy.
And that's it, deliver the Cigar to him. And you're good to go, or are you...?