Philippine President Benigno Aquino vowed Wednesday to launch a military assault aimed at ‘neutralising’ Abu Sayyaf Islamic militants who beheaded a Canadian hostage and are holding more than 20 other foreigners.

‘Casualties are to be expected. But what has to be of utmost importance is neutralising the criminal activities of the ASG,’ Aquino said in a statement, referring to the Abu Sayyaf by a commonly used acronym.

Aquino released the statement after the severed head of Canadian John Ridsdel, kidnapped seven months ago from aboard a yacht, was dumped Monday on a street on Jolo, a remote southern island that is one of the Abu Sayyaf's main strongholds.

‘This murder was meant to terrorise our whole population. The Abu Sayyaf thought they could instill fear in us. Instead, they have galvanised us even further to ensure justice is meted out,’ Aquino said.

‘We have always been open to talks with those who desire peace, but those who commit atrocities can expect the full might of the state.’

The Abu Sayyaf militants, whose leaders have pledged allegiance to the Islamic State group, are holding more than 20 other foreigners captive.

These include another Canadian, a Norwegian man and a Filipina who were abducted at the same time as Ridsdel at a marina near Davao, the biggest city in the southern Philippines and about 600 kilometres (370 miles) from Jolo.

The Abu Sayyaf is also believed to be holding a Dutch bird watcher kidnapped from a southern Philippine island in 2012, as well as 18 Indonesian and Malaysian sailors abducted over the past month.

Aquino said the captives were under the control of Radullan Sahiron, one of the Abu Sayyaf's founders famous for losing one arm in battle against the military.

He said Sahiron had consolidated his forces around himself and the captives in Sulu, a small Muslim-populated archipelago about 1,000 kilometres from Manila. Jolo is the biggest island in Sulu.

‘This presents both a problem and an opportunity. It is a problem because of the sizeable force surrounding Sahiron and the captives, but it is also an opportunity because smashing these forces is within our grasp,’ Aquino said.

The Abu Sayyaf is a radical offshoot of a Muslim separatist insurgency in the south of the mainly Catholic Philippines that has claimed more than 100,000 lives since the 1970s.

It is believed to have just a few hundred militants but has withstood repeated US-backed military offensives against it, surviving by using the mountainous jungle terrain of the southern islands to its advantage.

Although the Abu Sayyaf's leaders have pledged allegiance to Islamic State, analysts say it is mainly focused on kidnappings for ransom.

Abu Sayyaf gangs have earned many millions of dollars from kidnapping foreigners and locals since the early 1990s.