After second quarter results missed Street estimates by 16%, all eyes are looking towards ongoing negotiations between Freeport-McMoRan Inc (NYSE:FCX) and the Indonesian government. With Freeport leaving investors frustrated, shares were on a close to 4% dip yesterday.

Analyst Fawzi Hanano of Berenberg notes that despite the mining giant missing the mark on earnings, the market has responded well to the upbeat comments from CEO Richard Adkerson regarding the negotiations, which is helping to keep the giant at the head of the pack. This is especially remarkable considering that management trimmed 2017 sales guidance to c1.7mt (3.7bn lbs) from 1.77mt (3.9bn lbs) while slashing gold guidance from 1.9moz down to 1.6moz. The analyst, however, does not see a potential deal as a clear way forward.

Hanano states: “We see a number of potential outcomes from current negotiations, ranging from an agreement consistent with Freeport’s terms as a best case, to a breakdown of talks and arbitration proceedings. In our view, there is no real win-win solution as even a ‘good’ outcome for Freeport may still imply downside for the stock. We believe the market may not be fully reflecting the potentially negative impact from a divestment and the cost to build a smelter in Indonesia.” The analyst is cautious that a required divestment of company stake could range anywhere from 49% – 90.6% and could carry significant long-term risk to the company.

In a best case scenario, Hanano sees 30% divestment on operating control, 50% partner on a smelter completed by 2020 and a 24-year extension on fiscal and legal stability. However, even this optimistic outlook comes with an important caveat mainly that we have no idea how “as to how the Indonesian Government defines fair market value.” The evaluation of the Indonesian Authorities “may become a sticking point and biggest hurdle in the negotiation process,” opines Hanan.

All things considered, the analyst maintains a Sell rating on FCX while lifting the price target from $10.00 to $10.40, implying a 28% downside from where the shares last closed. (To view Fawzi’s track record, click here.)

TipRanks analytics reveal FCX as a Hold. Out of 8 analysts polled by TipRanks in the last 3 months, 2 are bullish on Freeport stock, 2 are neutral and 1 is bullish. With a potential downside of near 4%, the stock’s consensus target price stands at $15.05.