In order to find a pouch of Yellow Powder, you must kill either Araf Kul or Roshnak Tul (located at Arakas Orc Camp).
The drop of yellow powder is rare and you may need to kill them more than once in order to find it.
Once you find it, go to the Lighthaven mage tower and find an NPC named Lothan. Say Yellow Powder and he will reward you with a Ring of the Initiate, Gloves of the Duelist, or 850 Gold Pieces.
Note 1:
An easy way to kill Araf Kul and Roshnak Tul if you are a fighter (or if you use melee combat) is to approach him slowly, killing all the Orcs that you find in your way.
Don't hesitate to backstep a little bit, if you are overwhelmed.
First clear the whole area and when he is alone, attack him. On the other hand, if you are a mage, use an earth/fire based spell for the damage and Lesser Drain for recovering your lost HP.
Gain:
Note:
You can do this quest as many times as you want.