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(Updates share price, adds source comment, offering details)
By Allison Martell and Euan Rocha
TORONTO, Nov 1 (Reuters) - A massive public share offeringfrom Barrick Gold Corp proved a tough sell, marketsources said on Friday, as the price of gold dropped andinvestors digested news that the miner had shelved a key growthproject.
Toronto-based Barrick said late on Thursday it would issueup to $3.45 billion worth of common shares at $18.35 a share ina deal to pay down part of its heavy debt load.
Shares of the world's biggest gold producer closed 34 centsbelow the offer price on Friday.
Barrick would not comment on the deal, which was announcedhours after the Toronto-based company said it was shelving itsmassive Pascua-Lama gold-silver mine, high in the Andes on theborder between Chile and Argentina.
"The timing of the whole deal was really bad. They announcedit last night, the Europeans were basically gone, gold had justhad a crappy day and all the nice young traders on this end weregetting their kids dressed up for trick or treating," said atrading source who asked not to be named.
Pascua-Lama had been a key growth project for Barrick butalso a drain on its cash reserves.
Barrick's New York-listed stock closed down 7.1 percent at$18.01, its lowest level in more than two weeks. Shares ofprecious metal miners were broadly lower as the price of goldfell to a three-week low.
The weak reception for the offering does not affect theprice Barrick receives for its shares. It could hurt the deal'sunderwriters, led by RBC Capital Markets, Barclays and GMP Securities LP.
The deal should help relieve worries about Barrick's debt,which totaled $15.4 billion on Sept. 30. The company's marketcapitalization was about $19.5 billion at Thursday's close.
But there is a cost. The offering, coming with Barrick'sstock down more than 40 percent this year to date, badly dilutesexisting shareholders, increasing the company's share count bymore than 15 percent.
And it is the company's second multi-billion dollar equityoffering in only a few years. In 2009, Barrick raised some $3.0billion at $36.95 per share, so it could eliminate its goldprice hedges.
TOUGH SELL
Adrian Day, president of Adrian Day Asset Management, sawBarrick's decision to mothball Pascua-Lama as a long-termnegative for the company, because the project underpins so muchof Barrick's future growth.
"It looks to me like a long-term shutdown - and that removesat least a large part of the whole thesis for buying Barrick,"said Day, who has about $145 million in assets under management.
Day had been building a position in Barrick's beaten-downshares before the announcement, and currently has about $400,000in the company. But he passed on the new issue because hebelieved the stock would fall below the offer price.
In a bought deal, underwriters commit to purchase the entireoffering from a client and then resell it. If they resell sharesbelow the offer price, their margins take a hit, and they couldeven lose money on the deal.
It was not clear how much of the offering the banks had beenable to sell before the shares ropped below the offer price.
RBC and Barclays declined to comment. GMP could not bereached for comment.
The fall in Barrick's Toronto-listed stock on Friday - downC$1.56 at C$18.72 - was the biggest drag on Canada's main stockindex, the Toronto Stock Exchange's S&P/TSX composite index.
($1=$1.04 Canadian) (Additional reporting by Cameron French; Editing by PeterGalloway, Janet Guttsman, James Dalgleish and Andrew Hay)
