(Reuters) - Zijin Gold International, a wholly owned unit of China's Zijin Mining, is aiming to raise HK$24.98 billion ($3.21 billion) in a Hong Kong initial public offering, the largest in the city this year, according to its prospectus released on Friday.

Zijin Gold is selling 349 million shares at an offer price of HK$71.59 apiece, with trading to commence on the exchange on September 29, the prospectus showed.

The deal comes as gold, which tends to perform well in low-interest rate environments and during periods of uncertainty, has gained nearly 39% so far this year.

Zijin Gold's IPO is set to overtake Chinese automaker Chery's offering this week that aims to raise up to $1.2 billion and become the largest in Hong Kong this year.

Hong Kong's capital market activity has been driven mainly by companies listed in mainland China making Hong Kong share sales.

Battery company CATL, which was already listed on the Shenzhen Stock Exchange, raised $4.6 billion in May - in Hong Kong's largest listing at the time.

Zijin Gold, which operates all of Zijin Mining's gold mines outside of China, said in the prospectus that it is planning to use the proceeds over the next five years for the upgrade and construction projects of existing mines to fully enhance its production capabilities, among others.

Cornerstone investors have subscribed for about $1.6 billion worth of shares in the deal, according to the prospectus.

Singapore wealth fund GIC and private equity firm Hillhouse will buy $150 million worth of shares each in the IPO. Asset managers BlackRock and Schroders will take $120 million worth each, the prospectus showed.

Morgan Stanley and CITIC Securities are the joint sponsors of the offering.

The spin-off and independent listing of Zijin Gold International will broaden the company's financing channels and improve overall financing efficiency, according to Zijin.

($1 = 7.7771 Hong Kong dollars)

(Reporting by Kane Wu in Hong Kong, Scott Murdoch in Sydney and Sherin Sunny in Bengaluru; Editing by Alan Barona and Muralikumar Anantharaman)