If you have the Treasure Hunter's Diary (purchased from certain Merchants) on you when talking to the Sea Collector, you will have the dialogue option "Give the Journal". He will tell you the following:
Treasure Hunter's Diary
Ah yes! I see you have read the diary of the treasure hunter, Balan. If I were you, I'd get started looking for those items. It looks like the ancient burial cloth can be found in ancient chests. Those are usually surrounded by tall stone pillars. As for the embalming agent, try a gravesite. Surely you know how to find a gravesite yes? Look for a tombstone!
Once you have acquired both, craft them together in order to create the Ancient Treasure Instructions. Then, you need to give the Ancient Treasure Instructions to a Sea Scholar, as hinted in the Ancient Treasure Instruction's description.