Miner OZ Minerals (ASX:OZL) has substantially increased its guidance for gold production to 2012 after better than expected output in the June quarter.

The company announced Friday its copper production was also strong during the quarter and is on schedule to meet full year guidance.

OZ Minerals had an output of 28,236 tonnes of copper and 49,249 ounces of gold in the three months to June.

''Gold production was particularly strong,'' the miner said.

''This sees an increase from the previously announced guidance of 110,000 ounces to 120,000 ounces, to a range of 140,000 ounces to 150,000 ounces for 2010.''

According to the company, production costs had also dropped because of gold by-product credits connected with higher gold grade, recovery and prices. It changed its guidance on cash costs from between 80 and 90 US cents to 70 to 80 US cents per pound.

Although copper grades processed were lower than in previous quarters, throughput was higher and recoveries were stronger than expected, OZ Minerals said.

''Gold production was in excess of expectations due to gold representing a higher proportion of the total ore feed, ore grades higher than the average reserve grade and improved gold recovery.''

The Prominent Hill mine in South Australia is OZ Minerals' only producing asset after selling nearly all key properties to a Chinese company last year to alleviate debt.

Sales were stronger during the June quarter than in the previous period, which was impacted by transport delays, OZ Minerals said.

''By the end of the quarter the majority of concentrates produced and stockpiled had been shipped through the Ports of Darwin and Adelaide.

''Stocks have now returned to normal levels.''

OZ Minerals announced yesterday it had given the go signal to develop an underground mine at Prominent Hill to complement its current open pit mine.