* Clean up, production suspension prove costly

* Q4 op. loss 57 mln euros vs 21 mln in poll

* Debt-to-equity ratio 184 percent

* Shares down 3 pct

By Terhi Kinnunen

HELSINKI, Feb 14 (Reuters) - Talvivaara said it was seeking to raise 260 million euros ($349 million) through a rights issue to keep its nickel mine running, after a costly waste water leak last year strained its finances.

Clean-up costs and suspended production have proven costly, and the company reported a fourth-quarter operating loss of 57 million euros, bigger than the market's average forecast of 20.9 million euros in a Reuters poll. The results included 23 million euros worth of costs related to the leak.

Talvivaara's mine in Sotkamo, eastern Finland, a pioneer in using bacteria to extract nickel in a process known as bioheapleaching, ran into a series of production problems including a toxic leak that was discovered in November.

Many analysts had said the mine may be shut down unless it could secure more financing, with 77 million euros worth of convertible bonds coming due in May.

The company, with a market capitalisation of $378 million, ended the fourth quarter with cash of just 36 million euros and a debt-to-equity ratio of 184 percent.

"The company still faces some difficult operational hurdles but today's actions provide breathing space to allow operations to return to profitability," said Liberium Capital analyst Ben Davis.

Chief Executive Pekka Pera said the financing arrangement, which will also include a renegotiated revolving credit facility of 100 million euros, will help tide it over until its production ramps up again.

"The announced capital raise is critical to secure resources to achieve our vision for Talvivaara," he said in a statement.

Although the rights issue was expected, the amount was bigger than the 200 million euros some analysts had forecast.

The shares, listed in London and Helsinki, were down around 3 percent by 0905 GMT on both bourses as investors feared a dilution in the value of existing shares.

The rights issue was endorsed by the company's top investors. Finnish government investment firm Solidium and mutual pension insurance company Varma, in addition to Pera, said they would participate in the issue.

The company also said it will receive advance payments from customers Cameco and Nyrstar on delivery contracts.

Authorities have given Talvivaara the green light to discharge some excess waste water from the mine - a crucial step in restarting mining and crushing. The company plans a restart in July.

Talvivaara estimated its production in 2013 would be 18,000 tonnes of nickel and 39,000 tonnes of zinc.