UPDATE 1-Russia's Polyus Gold prepares for 2014 output fall

* FY sales down 12 percent to $2.3 billion

* Output up 5 percent to 1.65 mln ounces

* Sees 2014 output at 1.58-1.65 mln ounces

* Capex at $650-750 mln in 2014 vs $1.2 bln in 2013

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MOSCOW, Jan 30 (Reuters) - Russia's top gold miner Polyus Gold PLGLq.L said on Thursday its sales had fallen 12 percent to $2.3 billion in 2013 after a drop in gold prices, leading it to forecast a possible slight drop in 2014 output due to cost-cutting.

Many gold producers were hit by a 28 percent fall in the price of gold XAU= last year - its biggest annual loss in 32 years - prompting miners to cut costs, delay new projects and hedge their positions, selling their production forward.

Polyus, controlled by Suleiman Kerimov, said 2013 output rose 5 percent to 1.65 million troy ounces and estimated production this year would amount to between 1.58 and 1.65 million ounces.

"The possible small decrease in total gold production is expected to be driven by a planned reduction in mining works at the highest-cost alluvial deposits due to the current gold environment," Polyus said in a statement.

The company plans to slash capital expenditure in 2014 to between $650 million and $750 million, compared with around $1.2 billion last year.

Polyus's cost-cutting and conservative output plans for 2014 mirror those of its Russian sector peers, with Petropavlovsk

POG.L seeing a 16 percent fall in production this year and Nord Gold NORDNq.L also forecasting a decline in output.

Rival Polymetal POLYP.L plans to keep 2014 production flat.

Russia's Gold Industrialists' Union plans to prepare an estimate for the country's 2014 gold production in February when all the data for last year is published.

(Reporting by Diana Asonova and Alessandra Prentice; Editing by Lidia Kelly and David Holmes)

((alessandra.prentice@thomsonreuters.com)(+7 495 775 12 42)(Reuters Messaging: alessandra.prentice.reuters.com@reuters.net))

Keywords: RUSSIA POLYUS