He said they paid 7.9 billion yuan for an 80 per cent stake, valuing the whole deal at 10 billion yuan. Another party valued the deal at half that just months before, Wang said.

Wang accused Song Lin , chairman of CRP parent China Resources (Holdings), of ordering the deal in 2010. Song was CRP chairman at the time.

China Resources - a Hong Kong-registered conglomerate ranked 187th on magazine's Global 500 list this year - operates in sectors including retail, finance, gas, construction materials and electricity. It reports to the central government, making Song's position equivalent to that of a vice-minister.

Wang said an assessment for CRP by Shanxi Borui Mining Rights Valuation & Appraisal had valued its 80 per cent stake, including three coal mines, at 8.35 billion yuan. It had projected that the Yuanxiang mine would book pre-tax profits of 192 million yuan in 2010, 951 million yuan in 2011 and 1.22 billion yuan last year. But it had made losses every year.

Wang said an internal audit by China Resources also found the valuation to be massively above the actual worth of the assets.

Citing a worker at the Zhongshe mine, Wang said it had stopped production and its exploration permit had expired. A visit to the Hongyatou mine had revealed that it had been turned into pasture for sheep.

Hong Kong-listed CRP said in a statement yesterday that Taiyuan China Resources, a 49 per cent-controlled joint venture, had obtained a mining permit for Yuanxiang in April. Exploration rights were obtained at Zhongshe and Hongyatou in 2003, and it was applying for mining permits.

It said the exploration rights obtained in 2003 were not converted into mining rights because the local authorities were consolidating mines at the time.

CRP said the purchase price was less than Borui's valuation and it reserved the right to take legal action against anyone releasing false information that hurt its reputation.

Standard Chartered analyst Evan Li said there were "still a lot of unknowns that made it impossible to assess CRP's exposure to any losses in the deal".

A statement of claim filed by the shareholders in the High Court in Hong Kong claimed Zhongshe's exploration right had expired in 2007 and that of Hongyatou in 2009. They cited a 2009 letter by Shanxi's Department of Land and Resources as saying no request had been made to extend them.

Chen Ruojian, a partner at Duan and Duan law firm, which is representing the shareholders in the lawsuit against 20 existing and former CRP directors alleging a breach of fiduciary duty, said the deal should be cancelled.

"This was a defective deal," Chen said in Beijing yesterday. "These are state assets that do not belong to [the seller] after the permits expired." He said he expected the court would hear the case this year.

Li Su, senior partner at Hejun Vanguard Consulting Group, an adviser to the shareholders, urged Hong Kong's securities regulator to suspend trading of CRP's shares and launch a probe.

Democratic Party lawmaker James To Kun-sun called on regulators to review existing listing rules that exempt listed firms from disclosing dealings by units in which they have a stake of less than 50 per cent.

CRP said it had no duty to disclose details of the acquisition. In its latest annual report, it said HK$2.96 billion of the venture's exploration rights had expired by the end of last year.

While there was no restriction on renewing the rights, it warned of potential "significant impairment" of the investment in the venture if it failed to do so.