I dont think you can sell the stone axe, not as far as i can remember.
In the dwarven halls , to the west there is a mine, where you can initially explore the first level, you can see the entrance the the next, but its covered by rocks, so you cant get in there. (its in the area where all the dwarves tell you there are monsters or somthing in the mines).
When you have the quest for the stone axe, you will be able to go down to the 2nd level of that mine. kill a couple of badies and you find the stone axe, along with a letter.
Take both that to the dwarven king.
