Jessie Willcox smith

Little orphan Heidi has been sent to live with her grandfather in the Alps. Everyone in the village is afraid of him, but Heidi is fascinated by his long beard and bushy eyebrows. Then one terrible day Heidi is collected by her aunt and made to work for a new family in town. Heidi cannot bear to be away from her grandfather; can she find her way back up the mountain, where she belongs? [From publisher's description]

A little princess is protected by her friend Curdie and her newly-discovered great-great-grandmother from the goblin miners who live in caves beneath the royal castle.