The Elven sword of the Blue Mountains is a steel sword that can be found on Elves later on in the game. It can also be found on the second floor of the Scoia'tael hideout in Old Vizima during Chapter V (right after sex with Toruviel). It can be found lying on the floor. It is used primarily against humans and has little effect on monsters. Scoia'tael in The Witcher 2 use the "sword of the blue mountains" which is presumably the same. The weapon does not import across saves like others do.