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This is one of the more standard Witcher contracts that you can get. If you check the notice board outside of the inn, you'll find that someone wants you to kill a whole bunch of nekkers. These little annoying monsters are a big threat, so there's a decent payday waiting for us once we stop them. You can buy a book from Einar Gausel about them which will point this out for you. You'll even get a journal update once you read it. It seems that we just have to destroy their tunnel entrances to kill most of them off and leave the rest scattered and disorganized.
In order to stop the threat, we'll need four grapeshot bombs. If possible, don't just buy these. You can get the diagram from Cedric for a reasonable sum. The actual materials aren't a big deal, so it's far more economical to just make them yourself. You can probably make them out of the nekker hearts and flowers that you'll be flooded with as you venture out into the forest.
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The battles will follow a fairly standard path. You'll need to kill the nekkers that emerge as you approach the tunnel. There will usually be a few warriors amongst them. I find it much easier to leap around and kill the weak ones in a few hits to clear out the battlefield. You really need room to run, if you don't want to get scratched up.
Their attacks are surprisingly damaging. If they manage to surround you, you will probably die. Their hits will stagger you, which leaves you open to a lot of damage before you can get steady again. They don't offer much in the way of poison, although bleeding isn't out of the question. They're fairly fast, so you can't just run and be sure of escaping unharmed.
Quen will really help protect you against the occasional scratch, so it's a good idea to keep that up as much as possible. Dodging is great, since staying mobile is vital. If you want, traps are incredibly useful. If you've picked up a few snare traps, you can just lay a few in their path. A snared nekker is effectively dead. It will stop them in their tracks, which is always nice, and do a fair bit of damage. They're also free, if you've been picking them up as you walk around the forest. Bombs are probably overkill, to be honest. I wouldn't waste them on enemies like this.
Other than that, just pick off the weak ones with your silver sword and then hammer away at a warrior. If you smash them repeatedly, you should just be able to stun lock them and take them out. Rinse and repeat against the scattered forces (they should be scattered if you're moving a lot, at least) and clear the area.
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Bombing the Tunnels
While you have a break, use the medallion to highlight the tunnel and then walk up to it. There's a context option to put a grapeshot bomb into the tunnel entrance. Drop it in, and take a few steps back to avoid unnecessary damage. In just a few seconds, the bomb should go off and collapse the tunnel. The area should be secure from now on. Also, note that nekker hearts and teeth are fairly useful, so go around and pick them up. If nothing else, they're easy to gather and sell.
You can find three of the four nekker tunnels around the bog. It's a stripped line area to the southeast of Flotsam on the map. Just walk into the actual swamp and watch for where they emerge. Two are directly inside, and one is on the edge. Remember that it's a bad idea to just run right in, since you won't want to fight all of them at once. The fourth and final nekker tunnel is to the right a bit, just above the nice spring and waterfall where you get the Ostmurk. Keep an eye out for the bone piles and you'll spot it quickly.
Once the fourth tunnel entrance is sealed, the forest will be a bit more quiet and you'll be able to turn it back in for some orens. Just talk to Louis Merse in his house to get it.
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All information and screenshots from a "Normal" difficulty playthrough of Witcher 2
Due to the branching nature of the game, and the differences in equipment, your experiences with the game may differ. Please feel free to report such differences in the comments.