Tools are a multi-purpose good in Colonization. They are produced from Ore in a Blacksmith's house, Blacksmith's shop or Iron works. A Master Blacksmiths increases the rate of production. Tools may also be purchased in Europe, initially at a cost of 3 gold apiece, with the price rising over time.
Tools are used in the construction of many buildings, and in all military units. When rushing the production of a building or military unit, Tools may be purchased directly from the build queue interface at the current market rate. These Tools appear in your warehouse, and may be loaded onto a ship or Wagon Train or given to a Hardy Pioneer. (Then you may purchase more Tools through the build queue interface, etc.)
A Hardy Pioneer, or an unskilled colonist performing the same job, requires tools to perform his terrain alterations. A Pioneer may be equipped with up to 100 Tools. Each job he finishes uses up 20 Tools.