The miner said it would sell 27 billion shares at 1p per share. That compares with a share price of 16.25p on Friday.
Its shares have already tumbled 90% this year as it has also struggled to cope with strikes and rising costs.
Lonmin had already stated that its shares would be issued at a "significant discount".
Shares in the platinum miner rose nearly 10% to 17.75p in early trade on the London Stock Exchange.
Lonmin will use the cash raised to help secure $370m (£246m) in bank loans which will mature in 2020. Those loans will replace an existing $543m of loans, which are due to be repaid next year.
The company urged shareholders to approve the cash call, saying the injection was crucial to its survival.
It said if shareholders did not approve the rights issue, its lenders would not allow it to refinance its debt.
Platinum prices have fallen by about 22% in the last year.
"The rights issue has been fully underwritten and we hope shareholders vote positively. We firmly believe that the rights issue is in the best interest of our shareholders," Lonmin chief executive Ben Magara said in a statement.
The rights issue came as Lonmin reported an annual loss of $2.2bn, compared with a loss of $326m a year earlier.
The majority of its losses came from a $1.5bn impairment charge at its Marikana mine in South Africa, where 34 miners were killed by police during strikes and unrest in 2010.
Miners have been suffering heavily in recent months as a result of lower commodity prices. But Lonmin was also hit hard by another miners' strike in South Africa in 2014.
In July, it announced plans to close or mothball several mine shafts, putting 6,000 jobs at risk.
It said on Monday that about 3,100 people had since left the company.
Last month, Glencore announced the sale of two of its copper mines in Australia and Chile, in an effort to reduce a debt pile of £19.5bn created by its 2013 takeover of Xstrata.
The share sale is the second in three years at the embattled platinum minter.
Lonmin issued an $800m rights issue to shore up its balance sheet in November 2012.

K Prithika Yashini, who was born male but underwent gender reassignment surgery, applied to become a police sub-inspector in the southern state.
But the state police board did not recognise a third gender, leading her to pursue a legal case against it.
A court in Chennai (Madras) has now ruled in her favour.
"I'm excited," Prithika was quoted as saying by India's NDTV network. "It's a new beginning for the entire transgender community."
A ruling by two judges in Chennai's high court said: "The social impact of such recruitment cannot be lost sight of, as it would give strength to the case of transgenders.
"Yashini must reach the finish line, and not be stopped and disqualified in the middle."
India's supreme court recognised transgender people as a third gender last April, five years after the electoral commission added the category to ballot forms.
The ruling meant the government had to provide transgender people with quotas in jobs and education in line with other minorities, as well as key amenities.
There are an estimated two million transgender people in India.
While the Times of India reports that Tamil Nadu police already have three transgender constables on their books, reports in other Indian media said Prithika will become the first officer in the country.
Prithika was born Pradeep Kumar and left her parents' home before completing a computer studies course and undergoing surgery.
She had wanted to be a police officer since being a child, Indian media said.
The court also ruled that the result of a police physical test, which Prithika failed after being a second late in a 100-metre dash, was not valid.

The pedestrian died following an incident involving a green car in the Diamond area on Sunday afternoon.
Police said an 18-year-old woman had been arrested.
They have appealed for information.
Platinum producer Lonmin has priced its £270m share sale at a discount of 94% as it fights for survival after a near-collapse in the commodity's price.
[NEXT_CONCEPT]
The Indian state of Tamil Nadu is to hire the country's first transgender police officer after a court cleared hurdles that faced one applicant.
[NEXT_CONCEPT]
A woman has died after being hit by a car in Ballycastle, County Antrim.