Xstrata has increased its annual zinc production by 5% or 25,000t from two mines in Australia, the company has announced.

The company is accelerating production from the Lady Loretta underground mine and extending the life of the Handlebar Hill open cut operation in Queensland.

Xstrata Zinc Australia chief operating officer Brian Hearne said the expansion at both mines, through an investment of A$87m ($89.9m), will help the company realise significant value from its Australian zinc business.

"We are accelerating the delivery of ore from Lady Loretta to Mount Isa by developing the upper ore bodies independently to the deeper underground resources," Hearne said.

"At the same time, we are investing in a further expansion of the Handlebar Hill operation following improvements in mining methods and metallurgical performance since the mine was designed in 2007."

A total of A$57m ($58.9m) has been invested in the Lady Loretta project, increasing its annual ore production rate from 1 million tonnes per annum (mtpa) to 1.2mtpa.

Construction of the Lady Loretta project commenced in July 2011 to develop a greenfield underground zinc-lead-silver mine 140km north-west of Mount Isa, originally expected to commence production by the end of 2013.

Xstrata Zinc is undertaking the third phase of expansion at the A$30m($31m) Handlebar Hill Open Cut South project, which will extend its life to 2014.

The expansion involves developing a narrow cutback to the south of the pit and targeting deeper ore from under the first two stages of development.