Under the Radar: What should we know about Southern Alliance Mining’s diversification into rare earth mining?

Money Matters with Hongbin Jeong and Chua Tian Tian

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From undertaking sub-contracting works as an operator for limestone mines to becoming a key producer of high-grade iron ore concentrate – we’re going to take you though the ins and outs of SGX-listed Malaysian miner Southern Alliance Mining today.

The story takes us back to 2001, with the incorporation of Southern Alliance Mining’s subsidiary Honest Sam. Then, the firm was primarily involved in subcontracting works for limestone mines in the Malaysian states of Pahang and Perak.

Seven years later in 2008, the company obtained the right to become the mining operator of an open mine pit in Johor called the Chaah Mine.

The mine pit allows for the exploration, extraction and processing of iron ore that could be used by pipe coating companies in the oil and gas industry to prevent corrosion in sub-sea pipes.

Fast forward to today, Southern Alliance Mining not only offers iron ore for pipe coating. It also ventured into iron ore concentrates to diversify business risks, exporting them to markets such as China, before selling the rest to local steel mills in Malaysia.

It currently has approximately 60,000 tonnes of iron ore concentrates, not including pipe coating materials, and has produced and sold a total 6.3 million tonnes of iron ore products between 2008 and July 2021.

The firm recently also reported its earnings for the six months ended January. Revenue declined 23.8% on the year to about RM70.3 million amid weaker iron ore prices as well as slowing demand for China’s steel industry – so how concerned should we be about this?

But what is perhaps more exciting about Southern Alliance Mining is how it is positioning itself for the future.

For one thing, the firm had in April 2023 ventured into rare earth mining after inking two agreements to purchase stakes in iron absorption clay rare-earth mines in Malaysia. Again – what was the rationale behind the move, and how will the move bolster the firm from fluctuations in iron ore prices?

On Under the Radar, Money Matters’ finance presenter Chua Tian Tian posed these questions to Lim Wei Hung, Executive Director and Chief Operating Officer of Southern Alliance Mining.

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