Can't see loot chest even when i'm on the loot icon?

My friend mentioned there may be a digging element to the game possibly.. can anyone confirm? is there a metal detector or buried treasure?

Caves.

All of the answers above are correct, but only in part. Elevation is a big thing in Far Cry 3. You could be at the loot icon, but several hundred meters above or below it. Here are a few things that will help.

1. Go to the local shop, buy maps of the area. It will reveal all loot chests and special items on the map. Very useful.
2. If the loot icon appears on map, hover on it, and set a way point. SETTING A WAYPOINT WILL PINPOINT THE LOCATION. This means it will show you if it is above or below you. Remember that waypoints disappear if you are on top of them, so step back and view them. Way points will appear as a square bracket if in your FoV, and as a white arrow if outside of your field of view.
3. If there is water nearby, look along the shore for a cave.
4. If there is no water nearby, zoom in on the map, and look for black smidgens on the map. These are cave entrances.
5. Sometimes you will need to perform platforming to get to your objectives, look for vines/ropes that indicate platforming.
6. Some places are inaccessible via foot. For example, you can only glide onto Calvary Point. I know some people have painstakingly found jumping solutions to get on top, but with Calvary the idea is to fly in.

I hope this helps. If you have a specific location you can't reach, ask and I will see if i can find it for you mate.