* First-quarter gold production rises 18 pct to 168,375 ounces
* Says on track to meet full-year production guidance
* Shares rise as much as 7 pct (Adds CEO comments, analyst average production estimate, updates shares)
By Karen Rebelo
April 24 (Reuters) - African Barrick Gold Plc reported a higher-than-expected 18 percent jump in first-quarter production, improved grades and a sharp cut in costs, pushing up the miner's shares as much as 7 percent on Thursday.
The operational improvements encouraged investors to look beyond the company's 21 percent drop in first-quarter earnings.
African Barrick, which mainly operates in Tanzania, said production rose to 168,375 ounces in the quarter ended March 31, keeping it on track to meet its production target of 650,000-690,000 ounces this year.
"At this stage it looks like we will comfortably be in our top half of that guidance range," Chief Executive Brad Gordon told Reuters.
"We will look at where we finish Q2 and decide whether we need to revise our production forecast upwards."
Analysts at Morgan Stanley, Numis Securities and Investec had, on average, expected first-quarter gold production of about 160,000 ounces.
African Barrick also said its board had approved an acceleration of mining at the upper east zone of its Bulyanhulu mine in northwest Tanzania.
The zone is expected to produce 1.7 million ounces of gold, averaging 60,000 ounces a year, with initial production expected within three months, the company said.
African Barrick, whose main producing mines are in Tanzania, said core earnings - or earnings before interest, tax, depreciation and amortisation (EBITDA) - fell 21 percent to $64.7 million in the quarter ended March 31.
Revenue slipped 12 percent to $216.3 million as the average realised gold price fell 19 percent from a year earlier to $1,303 per ounce.
"I've learned not to have a view on the gold price," Gordon said. "We're planning our budgeting and all of the forwards (contracts) at $1,300 an ounce."
Gold prices have been falling as investors prepare for the roll-back of the U.S. Federal Reserve's extraordinary stimulus measures and invest in higher-yielding assets such as the U.S. dollar.
African Barrick, which initiated an operational review last year after parent Barrick Gold Corp's failed attempt to sell the business to a Chinese buyer, has tried to combat the fall in gold prices by increasing output and cutting costs.
Barrick Gold owns 64 percent of African Barrick, after reducing its stake from 74 percent in March.
All-in sustaining costs (AISC) fell 28 percent to $1,131 per ounce sold during the quarter, while average grades rose 23 percent from a year earlier to 3.2 grams per tonne.
AISC takes into account such things as administration costs, reclamation costs, social responsibility expenses, exploration and development costs, and sustaining capital expenditure.
African Barrick shares were up 3.7 percent at 257.4 pence at 0925 GMT. (Reporting by Karen Rebelo in Bangalore; Editing by Gopakumar Warrier and Ted Kerr)