The mine is located in cloakwood Forest. Once you have killed Davaeorn (I found wand of fire to devastate him, also a spell to hold him in place, make sure your ranged characters have better missiles equipped +1 or even +2). After the battle loot his corpse and take the key to the plug, return to level 1 of the mine, head to the north east corner and speaker to the miner (Rill) who will take the key and flood the mine.
if you warned the miners during your travels you will get a+2 rep boost, if not they will all drown and you get a-2 to rep..
