Head to Pine Creek. From here you can either enter the nearby cave to set explosives and close off the entrance, or kill the yao guai outside the cave. The cave option does not require combat. Completion of either option ends the quest successfully, and the particular method chosen has no effect on the rest of the game.
If opting to collapse the cave entrance, enter the cave. From here, explore the cave, looking for each of three marked positions on the floor where you must place the explosives. Note that the "mining explosives" are not "items" carried by the player; they are a part of the cave and only need to be enabled. They are visually identical to C-4 plastic explosive.
There are three yao guai in a central area of the cave, but killing them is not a requirement for this quest as they can be avoided while "placing the explosives." When all three explosives are set, exit the cave and trigger the mining detonator, sealing the cave and completing the quest.
If you opt to kill the yao guai outside the cave, simply follow the map markers to the targets and dispatch them. Once all of the target yao guai are killed, the quest is complete.
Even if you kill the yao guai in the cave before this quest, they may respawn. If they did not, the only way to complete the quest is to plant the explosives.
You may need to look closely for the charge markers, as they blend in with the cave floor making them difficult to see in the dark.
If you plant the explosives in the cave without triggering them, and then kill the yao guai at Pine Creek, the quest will be completed and you will not be able to detonate the planted explosives.
Waking Cloud will comment that it is very dangerous to directly attack the yao guai at Pine Creek. You can reassure her, but she will be skeptical.
Once you set off the explosives, you cannot enter the cave again.
It is possible to complete both optional parts of the quest, but it requires good timing. As you kill the third and final yao guai, you can quickly switch to the detonator and collapse the cave (assuming you placed the C4 previously). However, this will not give you any extra rewards.
