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Redwater Den lies west of Boulderfall Cave, between the Atronach Stone and Faldar's Tooth. From above the surface it appears to be just a ruined cottage, but it has a trapdoor which leads to an underground area.
It appears to be some sort of drug den; the place is littered with empty skooma bottles. There are people coughing, and tendrils of red smoke swirl in the air. Further into the depths, skooma is being made.
Sah must find a way to find to the secret spring and fill the Bloodstone Chalice