Security forces from the Somali breakaway state of Puntland said Monday they had raided an obscure but growing al-Qaeda linked militia whose leader is on a UN Security Council watchlist.

Three Puntland soldiers were killed in the pre-dawn raid on cave-riddled mountains near Galgala in western Puntland, where officials say local warlord Mohamed Said Atom has been building a force of several hundred militants.

"The operation was launched early this morning. So far, we have lost three soldiers. Seven were also wounded," Colonel Abdurahman Ali, a security official in Puntland's economic capital of Bosasso, told AFP.

Officials and residents in the mountainous area straddling the unofficial border between Somalia's northern breakaway states of Puntland and Somaliland had voiced concern recently over Atom's stepped up activity.

The local warlord has been singled out by the UN Security Council for violating an arms embargo and is believed to be a key supplier of arms to the Al Qaeda-inspired Shebab group that controls much of the rest of Somalia.

They said the remote mountains risked becoming an ideal hide-out for Somalia's growing Shebab-hosted contingent of foreign jihadis, akin to Afghanistan's Tora Bora mountains.