How to get to him:
This guy is at the second level of the game: Glitter Gulch Mine
To get to him you need to get mumbo's help, after you get mumbo ( he is in the top of a some rock's, just after passing Wumba's Hut ), get him and take it to the entrance of the level and go left, you will be in a cave and you will notice a big train laying on the floor, use mumbo to lift it and fix it.
After that bring back banjo there and enter the furnace.
How to beat it :
You will come up with Old King Coal, but don't worry its pretty easy to kill, just stand up on one of the coal so you don't get burned when he starts to growl, and start shooting it with your eggs, grenade eggs works well on him.
After you beat it you can use the train to go wherever you want to
NOTE: You need that train to get some jiggy's and to get one level of the game ( Grunty Industries ).