TORONTO (miningweekly.com) – Barrick Gold has decided to increase its huge $3-billion bought-deal equity offering, announced on Tuesday evening, to about $3,5-billion because of strong investor demand, the gold giant said on Wednesday.

However, Barrick's shares slid 6,5% by 16:16 in Toronto, to C$39,71 apiece, as investors responded to the enourmous stock sale.

The company is raising the funds to remove its forward gold sales, which will mean it can gain full exposure to soaring bullion prices. The announcement on Tuesday came just hours after gold burst through the $1 000/oz level.

The decision, under new CEO Aaron Regent, to tackle the 9,5-million-ounce hedge book is also an indication that Barrick expects gold prices will stay robust.

The firm will now sell 94,8-million shares at $36,95 apiece and, if an overallotment option is fully exercised, the shares offered will rise to as many as 109-million, for a total offering value of $4-billion.

The primary equity offering will be the biggest in Canadian history.

Gold producers across the industry have been reducing their hedge books for most of this decade, in order to take advantage of rising bullion prices, as the metal's price has catapulted from as low as $250/oz in 2001.

Going into this week, Barrick held the biggest hedge book of all gold miners and the forward sales have hung over the group's stock, particularly as gold prices strengthened.

About $1,9-billion of the cash raised Barrick's giant offering will be used to eliminate the Toronto-based miner's three-million ounces of fixed-price gold hedges, and the remainder will go towards settling a chunk of its floating spot price contracts.

The floating contracts stood at 6,5-million ounces, with a negative mark-to-market position of $3,7-billion, at September 7.

A $5,6-billion charge to earnings will be recorded in the third quarter as a result of a change in accounting treatment for the contracts.

Still, despite the dilution and hit to third-quarter earnings, the move to eliminate the fixed-price hedges was broadly welcomed by analysts and investors.

"We have a positive view of the offering as we think that full exposure to the gold price will outweigh the dilution and result in a higher [price-to-earnings ratio]," Standard & Poor's Equity Research metals and mining analyst Leo Larkin said in a note on Wednesday.

The decision to gain full leverage to the gold price on all future production was made in light of an "increasingly positive" outlook on the gold price, coupled with continuingly robust supply and demand fundamentals, Barrick said when it revealed the plan on Tuesday.

The company expects global monetary and fiscal reflation will be necessary "for years to come", which will increase the risk of inflation.

Regent also said that the gold hedge book had been a key concern expressed by shareholders and the broader market, and had drawn attention away from the company's operational successes.

Barrick's equity offering is being led by a syndicate of underwriters headed by RBC Capital Markets, Morgan Stanley, J.P. Morgan Securities Inc. and Scotia Capital Inc.