The blade drops from a darkspawn named Ancient Darkspawn, iirc in the Deep Trenches, but you need both the hilt and pommel before he'll spawn.  All I can suggest is try combing through that area one more time.  I found him in the middle of a tunnel, don't remember specifically.

I can confirm that he does exist... and I believe he was in the dead trenches however I could not say for certain.  The reward isn't really that great though.

Yeah I don't remember where I fought him. I have a feeling I fought him somewhere near a cliff? Then again, Matte said he fought him in a tunnel, so who knows.
 
As Teran said, though, the sword really isn't that great.

I found him on the main path through Dead Trenches (sorry can't remember where). You need to have the Hilt, the Pommel and the Quest "Admirable Topsider" (this can be found in Ortan Thaig by clicking on the grave - in the very "south east" little alcove).

Here's an excellent guide on how to get the weapon, and others in DA.   Also possibility to get a very good shield from this quest.