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Originally posted by Aragorn1:
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Are some gems not needed for upgrading an item, perhaps the horn of valhalla (the one found in the bridge district if that's it's name)?
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Yes, one requires a beljuril and the other a diamond. In addition to these, a sole rogue stone is needed to get into Shandalar's lair in the bridge district. Some mods may require gems, but these are the only ones I can remember in the unmodded game.