After resting and growing stronger (level 2), went to visit the remaining goblin room. Found a goblin holding Sildar hostage, negotiated and agreed to hunt down the bugbear leader and bring his head in exchange for Sildar.
Tracked the bugbear, avoiding an ambush and a pit trap, killed him and took his head back. Goblins double-crossed the party, but the party prevailed.
Rescued Sildar and found that Gundren had been taken (along with all the gear) to Cragmaw Castle – location unknown). Also something about a Black Spider.
Escorted Sildar back to Phandalin, returned some of the Lionshield Coster equipment and gained the reward. Purchased some improved equipment (2 x Studded Leather armour and a Longbow). On exiting, met some Redbrands. After some discussion, attacked them, captured three while the bear druid slaughtered the remaining one.
Took the captured Redbrands to the townmaster and convinced him to hold them in the cells until morning so long as they kept guard. In the morning Sildar told them about his missing comrade Iarno Albreck, missing for a few months.
After interrogating the Redbrand captives, found that they are likely holed up in a run down mansion up the hill, and are lead by a wizard ‘Glass staff’ who arrived a few months ago. Party think this could be Iarno, though Sildar is wary that they should not jump to conclusions.