By James Macharia

JOHANNESBURG, Nov 2 (Reuters) - AngloGold Ashanti (ANGJ.J), the world's No.3 gold producer, lowered its annual production target for the second straight quarter after suspending output at a South African mine for safety checks.

Aerial view of the AngloGold Ashanti mine in Sadiola, Mali (Photo: AngloGold Ashanti)

Africa's top gold producer also reported on Monday 2 November it swung to a better-than-expected headline loss for the third quarter on costs related to trimming its hedge book as well as stronger currencies, rising wages and power charges.

The company has vowed that by 2014 it will wind up its forward sales - among the biggest in the sector - to benefit from the spot price of gold.

"The disappointing factor is the downgrade on full-year production," said Daniel Sacks, a portfolio manager at Investec Asset Management.

"This decreases the company's valuation because they can't deliver what was expected. It's a safety-related issue and it's the reality of operating in South Africa."

Chief Executive Officer Mark Cutifani warned steep electricity tariff hikes from state utility Eskom [ESCJ.UL] would erode profit margins and boost costs in South Africa's gold sector by between 15 to 20 percent, making it one of the least favourable destinations for mining investors.

"Coupled with the exchange rate this could have a very serious impact on mining and the country's economy," he said. "It will certainly impact on production, costs and employment."

His remarks echoed comments last week by the chief executives of Gold Fields (GFIJ.J) and Harmony Gold Mining Co. (HARJ.J). [ID:nLT181196] [ID:nLU179609]

Eskom has applied to raise tariffs by 45 percent a year over the next three years to expand power generation. [ID:nLD681714]

OUTPUT LOWER

The group, which has about 20 operations on four continents, lowered full-year guidance to between 4.7 million and 4.8 million ounces from its original target of 4.9 million to 5 million ounces. It also cut its outlook in June.

In 2008, AngloGold produced 4.98 million ounces of gold.

Shares in AngloGold rose 1.7 percent to 293 rand, in line with its peers as spot gold XAU= steadied at $1,045 an ounce.

Cutifani forecast the gold price would trade at between $1,000 to $1,100 per ounce between now and the end of the year.

AngloGold posted an adjusted headline loss of 165 US cents per share in the September quarter versus adjusted headline earnings per share of 47 U.S. cents a share in the June quarter, after accounting for hedge buybacks and a stronger rand.

AngloGold said stronger operating currencies in Brazil, Australia and South Africa diluted the benefit of a stronger bullion price, which rose 4 percent on the June quarter.

Gold producers sell their gold in dollars and pay their costs in the local currency of the countries they operate in.

Third quarter gold production rose 5 percent to 1.187 million ounces as Geita mine in Tanzania recovered, but total cash costs rose to $534 from $472 per ounce in the June quarter.

The group also cut its gold hedge book further during the quarter, to 4.3 million ounces, and has so far slashed the entire forward sales by two-thirds since Cutifani -- who has said he is not a fan of the hedge book -- took over in 2007.

(Editing by David Cowell)