It can be found on the body of a dead settler in the yao guai tunnels. The note states they were building a settlement in the den and had blocked it off from the rest of the tunnels. However, the location of several raiders' bodies suggest the barrier was breached which may have accidentally let the yao guai in.
Nan needs to cut it with the crap stories about beasts lurking in the depths of the cave. Nonsense is scaring the kids. I have set up makeshift barriers until we have time to make permanent ones. The barriers are there more for my own sanity than anything.
We have been in this cave for a month now and we have finally been able to get everything settled. It's nice to be inside and not have to worry about raiding parties overrunning our camp at night. We're safe here and that's all that matters at the moment.