Southern Alliance Mining's Rare-Earth Business Delivers Profits-But the Real Test Comes Next as SAM Moves Up REEx HREE Rankings

Highlights

• SAM's 40% stake in MCRE generated RM132.1M in rare-earth revenue and RM58.4M EBITDA in FY2026, implying a ~44% EBITDA margin
• Gerik produced ~3,600 wet tonnes of rare-earth carbonate in FY2026, but SAM has yet to disclose NdPr, dysprosium, and terbium basket economics
• SAM climbs to #6 in REEx Heavy Rare Earth Access Rankings, reflecting real ionic-clay HREE production but not yet separation capability
• Operating cash flow surged to RM65.9M from RM4.0M in FY2025, with net cash of RM151.6M and borrowings down to just RM8.0M
• The next valuation catalyst is Gerik's third and largest parcel, targeted to begin operations by mid-FY2027

Southern Alliance Mining Ltd. (SGX: QNS) has delivered (opens in a new tab) something rare-earth juniors often promise but seldom show: positive rare-earth EBITDA and pre-tax earnings. FY2026 revenue rose 29.3% to RM257.8 million (US$61.4 million). SAM’s 40% interest in MCRE Resources contributed RM132.1 million (US$31.5 million) of rare-earth revenue, RM58.4 million (US$13.9 million) of EBITDA attributable to the parent, and RM31.5 million (US$7.5 million) of profit before tax. Yet SAM still recorded a RM23.3 million (US$5.5 million) loss attributable to shareholders. This is a rare-earth transformation—not yet a corporate turnaround.

REEx Insight — The Margin Is Real; Now Show Us the Molecules

MCRE sold 2,880 DMT of REO-equivalent, with SAM reporting its 40% share as 1,150 DMT. That implies approximately RM115,000 (US$27,400) of revenue per attributable REO-equivalent tonne. Dividing SAM’s reported RM58.4 million of rare-earth EBITDA attributable to the parent by RM132.1 million of rare-earth revenue produces an indicative REEx-calculated EBITDA margin of roughly 44%.

That is impressive. But the number investors need next is not simply tonnes—it is basket economics. SAM still does not disclose enough to reconstruct the underlying value of Gerik’s rare-earth stream: NdPr, dysprosium and terbium distribution, recoveries, payabilities, customer pricing formulas, and sustaining costs. Gerik produced approximately 3,600 wet tonnes of rare-earth carbonate during FY2026. That is an important commercial milestone, but carbonate is not the same thing as separated rare-earth oxides, metals, alloys or magnets.

That distinction is strategically critical.

In REEx’s updated Heavy Rare Earth Access Rankings, SAM/MCRE moves to #6, reflecting something increasingly valuable in the Western rare-earth universe: actual production combined with ionic-clay heavy-REE exposure.

But access is not separation. Gerik can strengthen upstream supply optionality, particularly if its basket proves rich in commercially recoverable heavy rare earths. Yet producing carbonate does not by itself eliminate the industry's central chokepoint—the ability to separate individual elements such as Dy and Tb at commercial scale outside China.

The next valuation unlock is therefore molecular transparency: what is actually inside each tonne, what percentage is recovered, and what does SAM ultimately get paid for it?

Cash Arrives, Questions Remain

The consolidated accounts reveal another important story. SAM generated RM65.9 million of operating cash flow, up dramatically from RM4.0 million in FY2025. Cash and bank balances reached RM151.6 million, while total borrowings fell to just RM8.0 million. No FY2026 dividend was declared because SAM intends to conserve cash for expansion.

Meanwhile, iron ore recorded a RM40.8 million pre-tax loss, including a RM29.1 million negative inventory movement as stockpiles were drawn down during the transition to the new Chaah operating model. Most revealing, consolidated PBT remained negative RM14.8 million even though rare earths generated positive PBT of RM31.5 million. The arithmetic difference is roughly RM46.3 million.

There is important context: FY2026 included RM27.6 million of additional identified non-cash charges—a RM17.5 million provision against a credit-impaired debtor and JV receivable, RM9.5 million share of JV losses associated with impairment of mine properties following a mining-license expiry, and RM0.6 million impairment of an inactive exploration asset. SAM says these accounting adjustments did not affect cash flow.

That helps explain the striking divergence between RM65.9 million of operating cash generation and the RM23.3 million shareholder loss.

Gerik’s Next Test

SAM now has to prove that FY2026 was the beginning of a scalable rare-earth business rather than an unusually profitable first year.

The next catalyst is Gerik’s third and largest parcel, where operations are targeted to begin by the middle of FY2027. SAM is also pursuing additional Malaysian rare-earth exposure, including the proposed acquisition of Paramount Synergy.

For REEx, the milestones to watch are straightforward: third-parcel production, REE basket disclosure, repeatable margins, downstream processing relationships, and movement from carbonate toward separated, magnet-relevant products.

The Stock — Fundamentals Improving Faster Than Consolidated Earnings

At the referenced September 24 closing price of S$0.41 (approximately US$0.32), investors are balancing an increasingly profitable rare-earth operation and substantial net cash position against consolidated losses, execution risk, and the absence of an FY2026 dividend.

The direction of travel, however, has become considerably easier to measure. SAM entered rare earths through its September 2025 acquisition of a 40% stake in MCRE. One year later, that investment is already producing meaningful revenue, EBITDA and pre-tax profit. As REEx has chronicled in previous coverage, our thesis on SAM remains constructive: the rare-earth business is beginning to provide financial evidence for a transformation that, until now, was largely strategic promise.

REEx Tagline: Gerik is producing. Now comes the harder race—from carbonate to strategic molecules.