The leeches infesting the Water-works have grown out of control and are preventing the dwarves from exploring further.
'I am not going down to the banks again. Not after what those leeches did to my legs the last time. I have a solution that I believe will get rid of them, but I will not try it.
'If you want to go down to the water and pour this in, you may feel free to do so. There are four places that are particularly bad, all near dead goblins. Those corpses are probably their primary food-source, when they cannot find my legs.
'Head just to the west. You will find the leech-infested water just beneath the Rotting Cellar.'
Leeches swarm around goblin corpses just to the west of the Rotting Cellar.
Gyrgir would like you to find the corpses the leeches have been feasting upon and spread newt-toxin around them to kill the leeches.
Gyrgir is in the Rotting Cellar in north-east Water-works.
Gyrgir will be pleased to hear the leeches will no longer pose a problem to the dwarves.