Magical Sword
Head toward where the Chieftain Tree is, then hang a righ and head to the graveyard. Start hacking up the "fallen pirates" until a chest drops. Open the chest and get a map. Examining will give you a quest to go kill some pirate. Now, head back toward the chieftain tree and pass it. By the waterfall you will see a grave stone. When you click it, it will spawn some Pirate Captain. Kill him and take his loot.
Now, go to the mender by the bank and have the mender fix the loot for like 11copper into a nice magical sword.
