A market, homes and a three-storey building were buried under tonnes of sludge when the disaster hit Taoshi township, Shanxi province, on Monday, Xinhua news agency said, adding 35 people were also injured.

More than 1,000 rescue workers were frantically looking for survivors on Tuesday, but the Xinhua report said it was not clear how many were still missing, with a local official quoted as saying rescuers had searched through 70 percent of the rubble.

"Most importantly we must focus on the search work. We must make a 100 percent effort to save the lives of people," Shanxi governor Meng Xuenong said on state television earlier.

Suzhou TV said the fatalities included workers not only from Shanxi, but also the municipality of Chongqing in southwest China and the central province of Hubei.

"For many, the identity has still not been established," the TV station said in a report on its website.

Photos of the rescue showed workers wading through the mud probing for victims with long poles.

The incident occurred about 8:00 am on Monday when a reservoir holding waste ore dregs at an illegal mine collapsed, sending mud, rocks and the industrial sludge storming into Taoshi, China's work safety administration said.

Stall operators at the the market place and office workers were just arriving to their jobs when the mudslide came crashing down.

"It was terrible," Xinhua quoted local worker Wei Guanghui as saying.

"The mud-rock flow looked about seven metres (23 feet) high. It roared down the valley and washed away the market and the houses in a few minutes."

Taoshi sits in a narrow valley at the base of Tashan mountain and has a population of around 23,000 people, with the ore mining industry a major employer, according to a Shanxi government website.

The Hong Kong-based Information Centre for Human Rights and Democracy, citing locals at the scene, said up to 500 people could have been buried, but local authorities could not confirm any numbers.

"We really don't know how many people were there at that time. We are busy with search and rescue work," an official at Xiangfen county, which oversees Taoshi, told AFP by phone.

Work safety officials are blaming the Tashan ore mine for the disaster and have detained its boss and eight other company officials, the administration said on its website.

The Tashan mining company was operating illegally and the stored waste ore dregs had surpassed the capacity of the reservoir, Wang Dexue, vice head of the work safety administration, said on state television.

Industrial accidents occur frequently in China, where mines and factories often operate illegally or in contravention of safety laws.

Government officials are known to turn a blind eye or collude with mining bosses to maximise returns from operations, as demand for resources in China has skyrocketed in recent years and offers the prospect of huge profits.

Nearly 3,800 people died in Chinese coal mines last year according to official figures, but independent monitors say the real figure is probably higher since many accidents are covered up.

Last week, 27 miners were killed in a mining explosion in northeastern China's Liaoning province, while 15 workers were trapped in a mining flood in Henan province, which neighbours Shanxi.

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