TORONTO (Reuters) - Freeport-McMoRan Inc shares jumped to a 16-month high on Tuesday, as soaring metal prices and progress in a long-running, costly permit dispute with Indonesia buoyed the world's biggest publicly traded copper miner.

Investors brushed aside quarterly results and full-year forecasts that were short of expectations, focusing instead on a two-year high for copper prices and Chief Executive Officer Richard Adkerson's confidence in securing a new mining agreement by October for Freeport's giant Grasberg mine.

Freeport's stock surged nearly 15 percent on the New York Stock Exchange by mid-day Tuesday, making it the top performer on the S&P 500 Index as it outpaced gains by fellow copper miners.

"Freeport's share price performance is justified based on what's happened in copper, based on the progress in negotiations and based on the fact that ... the stock is not very widely held," said Jefferies mining analyst Christopher LaFemina.

"This is a stock that many investors have not liked. It's under-owned and has had some good news. That tends to be a recipe for a higher share price."

The rally in copper is fueled by tight supplies, reflecting disruptions from Canada to Chile, alongside signs of robust demand from top consumer China and a weak dollar.

Freeport results and outlook were pinched by labor and operating issues at Grasberg, the world's second-largest copper mine.

After a 15-week outage related to the licensing row, Grasberg got a temporary license in April allowing copper concentrate exports until October.

As part of a plan to lower costs, Freeport this year cut 10 percent of its Indonesian workforce of 32,000. That sparked a strike, which miners extended last week for a fourth month, to the end of August.

Revised rules in Indonesia require miners to divest a 51 percent stake, relinquish arbitration rights and pay new taxes and royalties. Freeport insists on getting the same fiscal and legal protection in its current contract.

Fair valuation for the divestment, a sticking point in the past, could be resolved by a listing on the Indonesia Stock Exchange, said Adkerson, who is personally involved in the negotiations.

He added that Freeport is preparing for an arbitration claim if negotiations fail, but neither party wants that outcome. "There is a mutual sense of optimism," Adkerson told analysts on a conference call.

Without a long-term permit, Freeport would "significantly" reduce or defer $700 million budgeted in 2017 and $750 million in 2018 on a major underground mine development plan at Grasberg.

Freeport reported an adjusted profit of 17 cents a share, trailing the consensus of 20 cents, according to Thomson Reuters I/B/E/S. Its revenue of $3.7 billion topped expectations for $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. That followed cuts in April from 4.1 billion pounds of copper and 2.2 million ounces of gold.

Reporting by Susan Taylor; editing by Meredith Mazzilli

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Freeport stock soars 15 percent on copper prices, permit progress - Reuters