"3rd Round: The strength and location of each aura."
Does this mean that on the 1st round you use this you don't know where the magical item is?
Correct. Only presence or absence within that 60' cone.
Edit:
However, unless you're using the spell in combat the mechanic is usually glossed over.
Correct. Round 1 you just know if there is/isn't anything. 2 is how many and how strong the most powerful is, and round 3 is strength/location of each.