* Lonmin says 71 pct of shares on offer sold
* Underwriters to find more buyers or take up shares
* Shares fall more than 7 percent (Adds results of rump placing, analyst comment; updates shares)
By Olivia Kumwenda-Mtambo
JOHANNESBURG, Dec 11 (Reuters) - Platinum producer Lonmin's deeply discounted $400 million rights issue wasundersubscribed, forcing the company's underwriters to buyshares in the company, showing that investors are losing faithin the beleaguered mining sector.
Lonmin, seeking cash to stay afloat, said its underwritersfound new subscribers for about a quarter of the shares onoffer, after its shareholders only bought 19.2 billion shares,or 71 percent, of its proposed 27 billion share issue.
The underwriters, HSBC, J.P. Morgan Cazenove and StandardBank, will take up the other billion shares, Lonmin said.
The shares were priced at just a penny each on Nov. 9, a 94percent discount to the stock's previous session closing priceof 16.25 pence on the London Stock Exchange.
"The lacklustre support for Lonmin indicates a possiblemarket apathy for PGM (platinum group metal) stocks in whatremains a challenging market," BMO Capital Markets analystssaid.
Bruised by strikes, rising costs, a weak platinum price andslowing demand, South Africa-focused Lonmin also saidit planned to raise another $370 million in loans to refinancedebt currently due in May 2016.
Lonmin's shares have fallen 95 percent this year as themarket had worried about its viability with labour costs stillhigh and the price of platinum stuck at multi-year lows.
Its shares closed down 3.9 percent at 0.99 pence, havingearlier touched a low of 0.92 pence.
The pain is being shared by rivals such as Impala Platinum and Anglo American Platinum (Amplats), whichsold its labour-intensive South African Rustenburg mine to localgold producer Sibanye.
Amplats' parent company, Anglo American, is planningto shut or sell dozens of loss-making mines, highlighting thescale of the fallout from the commodities slide.
Platinum is trading at levels last seen in 2008,hobbled by slowing demand in top consumer China.
Goldman Sachs analysts said the Lonmin share issue wouldkeep the the platinum market in surplus as it allowed thecompany to remain functioning.
"We estimate the company now has sufficient funding in placefor at least a couple of years even if it continues to burncash," they said in a note.
Lonmin's shareholders approved the share issue last monthafter the company warned that if it couldn't raise the cashtrading in its shares could be suspended.
A Lonmin spokesman said South Africa's Public InvestmentCorporation (PIC), which owns about 7 percent of the company,took up its full entitlement.
The PIC had also sub-underwritten a material portion of theissue, over and above its entitlement, but the miner's spokesmansaid the company would not comment further. (Additional reporting by Mamidipudi Soumithri in Bengaluru,;Editing by David Clarke and Greg Mahlich)
