Gold miner Centamin cuts output targets on lower-grade ore

(Adds share price reaction, analyst)

LONDON, May 25 (Reuters) - Gold miner Centamin (Frankfurt: A1JPZ6 - news) has made a drastic cut to its full-year production guidance and raised its cost expectations because of lower-grade ore at its Sukari mine in Egypt, sending its shares lower.

Centamin's London-listed shares sank as much as 15 percent to their lowest since Dec (Shanghai: 600875.SS - news) . 13 at 135 pence.

Canaccord Genuity (Frankfurt: A0B6V4 - news) analysts said the 2018 guidance revisions was negative but in line with their expectations.

Gold output in 2018 will now be between 505,000 and 515,000 ounces, compared with a previous forecast of 580,000 ounces, Centamin said in a production update on Friday.

Centamin's all-in sustaining cost of producing an ounce of gold, an industry benchmark, is now projected at between $875 and $890 an ounce. Its previous target was $770.

Canaccord Genuity analysts said the 2018 guidance revisions were negative but in line with their expectations.

Centamin said there was low-grade ore from the transitional zone in Sukari's open-pit operation and lower development grade from underground.

Underground production is about 10 percent below forecast due to lack of equipment availability, Centamin said, while open-pit tonnage was ahead of schedule, albeit at a lower grade.

An updated mine plan forecast a weaker second quarter but strengthening for the rest of the year, the company said.

It had previously maintained its outlook for the year after posting a twofold increase in first-quarter profit on higher gold output.

"The company has in recent years rebuilt its reputation to one for reliability, so it is disappointing to see such a substantial downgrade just three weeks after it reaffirmed its previous guidance," Investec (LSE: INVP.L - news) analysts said in a note.

However, Investec maintained its "buy" recommendation on Centamin, citing the miner's resilient balance sheet, good shareholder returns and long-life production base. (Reporting by Zandi Shabalala Editing by David Goodman)