(Adds executive's comments from conference call on negotiations, joint venture partner Rio Tinto, ownership stakes)
TORONTO/VANCOUVER, Oct 25 (Reuters) - Freeport-McMoRan Inc is encouraged by talks to finalize an agreement for its massive Grasberg copper and gold mine in Indonesia this year, though it has not made as much progress as hoped, Chief Executive Richard Adkerson said on Wednesday.
Despite expressing some disappointment with the headway made so far, Adkerson said Freeport would push on with its talks with the government, which introduced new mining rules this year to gain greater control over the nation's mineral resources.
"But I can tell you that we are working positively and amicably with the representatives of the government," he said on a conference call from Indonesia's capital, Jakarta.
"At the same time, we are going to be relentless in representing the interest of our shareholders."
Arizona-based Freeport, the world's second-biggest copper miner, said it wants to avoid arbitration to deal with a new Indonesian policy that requires miners to divest a 51 percent stake, relinquish arbitration rights and pay new taxes and royalties.
But with few clear advances since a framework agreement on Grasberg was announced in August, Freeport shares dropped 3.3 percent on Wednesday to $14.73, reversing initial gains on better-than-expected financial results.
"Negotiations in Indonesia matter more than anything else for now," Jefferies analyst Christopher LaFemina said in a note to clients.
"While we are encouraged by Freeport's operational performance, progress (or lack thereof) in the company's ongoing negotiations with the government of Indonesia is clearly critical to the FCX investment case."
Progress has stalled on the valuation, timing and structure of divestment, which also affects Freeport's joint venture partner Rio Tinto . Rio has held talks with Indonesia about exiting the venture, according to media reports.
Freeport said its stake in the Indonesian operation would drop first to 49 percent and then to 29 percent under the divestment and joint venture plan.
"While our interest in the participation in Grasberg would be reduced, we would be receiving cash from that interest, which would reduce our exposure to Indonesia," Adkerson said. "There's positive and negatives to that."
Freeport earlier reported a third-quarter profit of 34 cents a share and revenue of $4.3 billion, bettering analyst expectations of 31 cents and $4.08 billion, respectively.
Average realized copper prices rose to $2.94 per pound from $2.19.
Copper prices charged through a three-year high last week, underpinned by improving manufacturing profits in China, the world's top user of metals.
Freeport maintained its 2017 sales forecast of 3.7 billion pounds of copper and 1.6 million ounces of gold, after twice lowering it this year. (Reporting by Susan Taylor in Toronto and Nicole Mordant in Vancouver; Editing by Steve Orlofsky and Paul Simao)