By Olivia Kumwenda-Mtambo
JOHANNESBURG, Nov 19 (Reuters) - Lonmin shareholderswill on Thursday decide whether to approve a deeply-discounted$407 million share issue, as the beleaguered platinum producerseeks cash to stay afloat.
Battered by strikes, rising costs and weak platinum prices,South Africa-focused Lonmin said last month it alsoplanned to raise another $370 million in loans to refinance debtcurrently due in May 2016.
Lonmin shares have tumbled more than 90 percent this yearand the firm has knocked $1.8 billion off the value of itsassets.
The depth of Lonmin's plight was illustrated last week whenit priced its rights issue at just 1 pence a share - a hugediscount to the stock's Nov. 6 closing price of 16.25 pence onthe London Stock Exchange.
Analysts said the low price was a strategy to forceshareholders to take up their entitlement or risk having theirinvestment in the company heavily diluted.
Lonmin has warned that if it doesn't raise the cash itneeds, its shares could be suspended.
"Investors are being left with little option but to followtheir rights given the very deep discount," Investec analystssaid in a note.
"However, compare Impala and Lonmin capital raising - Do youfollow your rights when proceeds are being used to pay debt orif proceeds are being used to finance a new lower costoperation?"
South Africa's Impala Platinum last month raised 4billion rand ($282 million) through the issue of new shares tofund the development of two shafts.
Lonmin has said its share sale has been fully underwritten.
South Africa's Public Investment Corporation (PIC), whichowns about 7 percent of the company, has committed to buying itsfull entitlement and has sub-underwritten a material portion ofthe issue, over and above its entitlement, Lonmin said.
"They must show us now that they can make a difference. Ifthey have to come back to us in a year, that will mean that theywere dishonest and their integrity will be brought intoquestion," PIC Chief Executive Daniel Matjila was quoted assaying in the Sunday Times newspaper.
Lonmin still has to convince the wider market it can be aviable business with platinum prices near seven year lowsbeneath $850 an ounce.
The metal used in emissions-capping diesel auto catalystsand jewellery is on track for a 30 percent decline this year,its third consecutive annual fall, hobbled by slowing demand intop consumer China.
This would be a third rights issue for Lonmin in six yearsafter the firm asked for cash from shareholders in 2009 and 2012to shore up its balance sheet.
Lonmin was hit hard last year by a five-month strike - SouthAfrica's longest and costliest - because, unlike peers such asImpala Platinum and Anglo American Platinum, almost allits operations were in the strike-affected area.
The rights issue is being underwritten by HSBC, J.P. MorganCazenove and Standard Bank.
($1 = 14.1850 rand) (Additional reporting by Clara Denina and Atul Prakash inLondon; Editing by Veronica Brown and Mark Potter)
