UPDATE 2-Red Back boosts offering 50 pct, cites demand

* Bought deal increased to C$60 mln from C$40 mln

* Issue was three times oversubscribed, CEO says

* Will fund expansion at Chirano, Tasiast mines

* Expansion to double production to 500,000-plus ounces (Adds CEO interview, updates stock price; figures in U.S. dollars unless noted)

By Susan Taylor

OTTAWA, Nov 21 (Reuters) - Canadian gold miner Red Back Mining Inc (RBI.TO) said on Friday it has hiked the size of a bought deal by 50 percent to C$60 million ($ million) in response to "strong investor demand".

Coming just hours after announcing a C$40 million deal, the junior's offering has been expanded to 17.15 million common shares from 11.43 million shares for C$3.50 apiece.

Analysts said that investor interest reflects an attractively priced stock, rising gold prices, and Agnico-Eagle Mines' (AEM.TO) $252 million private placement this week.

"There obviously is interest out there generally for gold stocks because it's maybe the one area in the market that's doing OK. Everything else is imploding around us," said Haywood Securities analyst Kerry Smith.

"It's definitely a positive development that you are seeing interest in the market to put new equity into these gold companies."

Red Back said it went to market because it faced a cash flow squeeze after budgeting expansion work and cash flow based on a gold price of $800 an ounce.

Spot gold XAU= rose to $798.75 an ounce on Friday, an improvement over the 25-year low of $720.35 hit on Oct 31, but still 22 percent below a lifetime high of $1,030.80 in March.

"You see a lot of companies are canceling their capital programs, they are shutting down whatever capital programs they are in," Chief Executive Patrick Clark said in an interview.

"There's no way we were going to do that because these expansions transform Red Back from a 250,000 ounce producer to plus-500,000 ounces."

Soon after the company decided that gold prices were sufficiently strong to proceed with a C$40 million deal, bankers said there was huge interest and "unhappy accounts" over their allocation.

"We had heard, after the Agnico-Eagle deal, that the institutions had a short list of companies they were very interested in, and Red Back was one," Clark said.