You arrive in Altin and things are a mess. The water is overflowing and flooding most of the homes in the village. Head west a little and you'll see a statue that you can move. Use Move on it to enter a small cave with a treasure chest in it. This chest will give you a useful Psy Crystal that you'll want to hold onto for later. Head to the inn to rest up, then go down the ladder right in front of the inn. Head south to find a Water Monster who's spitting water into the lake that was once a town. He'll flee into the cave and you should follow him. Go a little north in the cave to find the monster hopping very slowly up a ledge and to the other part of the cave. You'll probably want to save this point and inactivate all of your Djinn. Hop across the ice and then slide down the cliff and press A to battle the Living Statue. These guys are hard core water, so fire attacks are simply devastating against them. Like most of the earlier bosses, he has a lot of health but his attacks aren't all that powerful. As always, cast all of your summons against him off the bat, then hit him with Ragnarok with Isaac, Heat Wave with Garret, Plasma with Ivan and either attack or Ply with Mia. Once he's been defeated, you'll obtain a frost jewel that lets you use Frost when equipped (note: Mia should already know Frost.) Go down the ladder and frost the puddle. Now, jump across the ice pillar and go out of the cave.
You'll now notice that the water level is a little lower than it once was, but it's still not what it should be. Head to the east part of the town and go down the two ladders there. You'll now be able to go into the Mine Shaft called...