Blacksmith in Aldlyn. After talking to him there, you have to meet him again in the bottom left corner of Aldlyn before you can visit the elf village Ebron.
Katryx ore is explained during the quest, when you talk with the blacksmith in Ebron.
The blacksmith in Ebron is the girl Knocky. She won't make the sword for you, but give you the recipe to craft it yourself and tell you where you need to go for the Katryx Ore (Dhranholl mine in Begus). You'll also get the Mithril Pickaxe during the dialog, which is required to mine ore in dungeons.