Do you mean the key on the western island with the triangular teleporter pad? That opens a chest in the spider forest, about half way along the western edge. For all the effort it took to get the key, there is not much of value in the chest, though.

The alchemist is in the fire forest east of the village, in a cave not too far from the entrance. Before getting the quest to find him from the chieftain's son, the cave will be empty.