Head forward and beat up the boomerang goblin (avoid the mud in this entire area if you can), then continue for some relics. Drop down and beat up the next one as well. Head up north and there will be one more you can beat up before dropping down next to a building. Head north and four beetles will pop up out of the ground. Take them out (when they pop up punch them - be careful of their quick attack) and afterwards Knack will jump the fence.
Out here check the right wall near the end of the mud pit for a weak spot and relics, then head north. This beetle is an exploding one, so avoid him and kill the boomerang goblin. Head north again and you'll come across some goblin soldiers with hammers. They do a three-swing combo ending in an area attack. Way more deadly than your average goblin. Jump attack them after the area attack and do a follow up punch. Kill them both and the bars will lower.
Head around the corner and bash the door here for:
HIDDEN CHEST #37:
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After beating up the two hammer goblins, head around the next corner and bash down the door you see to find this chest and room.
Further in are two more hammer goblins and a boomerang goblin (a decent place for a Shockwave or Storm attack). After beating them Knack will climb up the pipe to continue. Gather the relics and go beat up the single hammer goblin. Follow the rocky path (watch out for a boomerang goblin) and head down to fight a bigger sword goblin. He has a two swing hit and likes to roll away, but isn't hard. Head to the northeast corner to continue.
Head forward and quickly KO the hammer goblin. The bigger guy shoots with a gun: three shots in a row. Hit him hard afterwards (watch out for his melee attack). Head to the right, gather the relics and then hit the doorway here for:
HIDDEN CHEST #38:
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After the fight with the gun goblin and the hammer goblin, head to the right and bash the next doorway you see to find this chest.
Head back up and trip the mine. Past that are two more hammer goblins and a boomerang goblin. Beat them up and continue, fighting a singular sword goblin in the next area (you can see the tanks in the distance). Head right for a scene.