Lawrence of the Silverglade told you about goblins that seized the mines. Go West and take the road to the North-East, to the mines. If you encounter any goblins along your path, this will mean that you are on the good way. They should not be too much of a challenge, because you encounter them only once, as a larger group. Still, they will be asleep. Try then to sneak past, without waking them up. In front of the mines entrance, you will encounter cultists from the village, who work with the goblins. Kill them and enter the mines. There, find Dreksis, who is being held captive in a holding cell. There are two ways in which you can kill the goblins. Open the door with the lever close to the grates, kill them and take his head (the little imp does not die). Take it to Lawrence to complete this quest.
The other way is to enter the previous door. You can either destroy it with the sword, after which you will be talked to, by the soldiers that locked themselves up there. Again, you will be able to convince them that you are with them. Either way, you need to kill them, because there is a detonator at the end of the room., which blows up the goblin cell (the imp dies). Open the cell with the lever close to the grates, then, and take the head.