* Net loss $32 from loss of $181 million a year ago
* Net cash at $17 mln from $63 million at December quarter
* To cut 3,700 jobs this year
* GRAPHIC: https://reut.rs/2KmVuY7 (Adds detail, quotes, analysts, shares, Johannesburg dateline)
LONDON/JOHANNESBURG, May 14 (Reuters) - Lonmin narrowed its first-half operating loss and set out plans to cut spending as the platinum miner tries to keep a takeover by Sibanye-Stillwater on track by conserving cash.
The proposed deal with precious metals producer Sibanye-Stillwater, vital to Lonmin's survival, is conditional upon Lonmin retaining a positive cash balance by the time it is scheduled to close in the second half of the year.
Lonmin has been crippled by soaring costs and subdued platinum prices, forcing it to raise cash from investors three times since 2009 and cut thousands of jobs.
But the appreciation of the rand against the dollar is undermining Lonmin's efforts, the company said, as it pays costs in the local currency and receives revenue in dollars.
"It remains a tough operating environment," Chief Executive Ben Magara told a results presentation in Johannesburg.
"Despite great mining and processing assets and being net cash positive for 11 successive quarters, Lonmin continues to be hamstrung by macro-economic challenges, its capital structure and liquidity constraints."
The London-listed miner reported a first-half operating loss of $32 million for the six months to the end of March, compared with a loss of $181 million a year earlier.
Net cash at the end of March fell to $17 million from $75 million a year earlier and from $63 million at the end of December.
The company has about $47 million that is locked up to cover a smelter outage that should be released and added back to net cash in the second half of the year, easing its position.
Lonmin will cut 3,700 jobs in 2018 as part of the 12,600 employees it plans to cut over the next three years, as it winds down high cost production, Magara said.
Job cuts are a thorny issue in South Africa where unemployment runs at about 28 percent. The layoffs could also be a challenge in securing approval for the merger from South Africa's Competition Commission.
Magara stressed the importance of the approval of the transaction, saying more jobs were at risk should it fail to close on schedule.
Shares in Lonmin, which have lost nearly all of their value, rose 6.5 percent by 1100 GMT.
"Looking to H2 as the smelter processes locked up material, we expect a significant working capital release, driving a net cash inflow in the half. This should reduce concerns over Sibanye walking away from the transaction," analysts at Peel Hunt said in a note. They have a "hold" rating on the stock.
Credit waivers that prevented Lonmin from defaulting on its loans granted in January are dependent on the company's planned merger and the company still faced liquidity challenges, its finance head said.
"This company's ability to continue to as a going concern for the next 12-18 months has material uncertainties associated with it," said CFO Barrie van der Merwe.
To save more cash, Lonmin lowered its full year capital expenditure target to 1.2-1.3 billion rand ($98 million-$106 million) from 1.4-1.5 billion.
It said unit costs for 2018 will be at the upper end of guidance but maintained is full-year sales guidance.
In the three months to March 31, platinum production rose to 143,374 ounces, up 3.9 percent from a year earlier. ($1 = 12.2525 rand)
(Additional reporting by Justin Varghese in Bengaluru Editing by Jason Neely/Keith Weir)