UPDATE 1-Lihir Gold to raise $325 mln to fund mine expansion

(Adds CEO quotes, details)

By Denny Thomas

SYDNEY, March 4 (Reuters) - Australian-listed gold miner Lihir Gold Ltd (LGL.AX) will raise $325 million by selling new shares to fund expansion at its Lihir mine in Papua New Guinea to benefit from strong bullion prices, it said on Wednesday.

Lihir Chief Executive Arthur Hood said work on the mine was being accelerated, in part because turmoil in commodities markets had increased the availability of mine construction equipment.

"The recent downturn in global commodity markets has significantly reduced demand for mining industry equipment... which has led to more competitive pricing," Hood told reporters.

The company last year produced 882,000 ounces of gold from its mines in Papua New Guinea, Ivory Coast and Australia and this year expects to surpass 1 million ounces for the first time.

"I would see us running at about one to 1.2 million ounces of production over the next two to three years, Hood said.

Unlike prices for industrial metals such as copper and nickel, which have dropped dramatically since last year's collapse in commodities demand, gold XAU= has surged on safe-haven demand, rising 10 percent since January.

"The medium-term trend for gold is very strong," Hood said.