UPDATE 1-Freeport says Indonesia mine talks progress, Q2 profits miss expectations

expectations@ (Adds detail on Indonesia permit issue, analyst expectations, revenue, outlook)

TORONTO, July 25 (Reuters) - Freeport-McMoRan Inc said on Tuesday that it was encouraged by recent progress in talks with Indonesia to resolve a lengthy permit dispute for its massive Grasberg mine, but if a long-term deal cannot be reached, it will pursue arbitration.

Arizona-based Freeport, the world's biggest publicly listed copper miner, also reported second-quarter profit and production that fell short of expectations.

In April, the miner resumed copper concentrate exports from Grasberg, the world's second-largest copper mine, after a 15-week outage related to the licensing row, but a permanent solution is yet to be found.

Freeport reported an adjusted profit of 17 cents a share, trailing the consensus analyst estimates of 20 cents, according to Thomson Reuters I/B/E/S, while revenue of $3.7 billion topped the view of $3.3 billion.

Freeport again cut its 2017 sales forecast to 3.7 billion pounds of copper, from 3.9 billion pounds, and 1.6 million ounces of gold, from 1.9 million ounces. In April it cut annual guidance from 4.1 billion pounds of copper and 2.2 million ounces of gold.

Consolidated sales of 942 million pounds of copper and 432,000 ounces of gold in the three-month period ending June 30 lagged the miner's April forecast of 975 million pounds of copper and 440,000 ounces of gold. (Reporting by Susan Taylor; Editing by W Simon)