FCX, §1A diff (2016 → 2017)

Item 1A. Risk Factors. This report contains “forward-looking statements” within the meaning of United States (U.S.) federal securities laws. Forward-looking statements are all statements other than statements of historical facts, such as projections or expectations relating to ore grades and milling rates; production and sales volumes; unit net cash costs; operating cash flows; anticipated tax refunds resulting from U.S. tax reform; capital expenditures; exploration efforts and results; development and production activities and costs; liquidity; tax rates; the impact of copper, gold and molybdenum price changes; the impact of deferred intercompany profits on earnings; reserve estimates; future dividend payments; and share purchases and sales. We undertake no obligation to update any forward-looking statements. We caution readers that forward-looking statements are not guarantees of future performance and our actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include the following: Financial risks Fluctuations in the market prices of copper, gold and molybdenum have caused and may continue to cause significant volatility in our financial performance and in the trading prices of our debt and common stock. Extended declines in the market prices of copper, gold and, to a lesser extent, molybdenum could adversely affect our earnings, cash flows and asset values and, if sustained, may adversely affect our ability to repay debt. Our financial results will vary with fluctuations in the market prices of the commodities we produce, primarily copper and gold, and to a lesser extent molybdenum. An extended decline in market prices of these commodities could have a material adverse effect on our financial results, the value of our assets and/or our ability to repay our debt and meet our other fixed obligations; and may depress the trading prices of our common stock and of our publicly traded debt securities. Additionally, if market prices for our primary commodities decline for a sustained period of time, we may have to revise our operating plans, including curtailing production, reducing operating costs and capital expenditures and discontinuing certain exploration and development programs. We may be unable to decrease our costs in an amount sufficient to offset reductions in revenues, in which case we may incur losses, and those losses may be material. Fluctuations in commodities prices are caused by varied and complex factors beyond our control, including global supply and demand balances and inventory levels; global economic and political conditions; international regulatory, trade and tax policies; commodities investment activity and speculation; the price and availability of substitute products; and changes in technology. Copper prices may be affected by demand from China, which has become the largest consumer of refined copper in the world, and by changes in demand for industrial, commercial and residential products containing copper. Copper prices have fluctuated historically, with London Metal Exchange (LME) spot copper prices ranging from $1.96 per pound to $3.27 per pound during the three years ended December 31, 2017. LME spot copper prices averaged $2.80 per pound in 2017, $2.21 per pound in 2016 and $2.49 per pound in 2015. The LME spot copper price was $3.25 per pound on December 31, 2017, and $3.22 per pound on January 31, 2018. Factors affecting gold prices may include the relative strength of the U.S. dollar to other currencies, inflation and interest rate expectations, purchases and sales of gold by governments and central banks, demand from China and India, two of the world’s largest consumers of gold, and global demand for jewelry containing gold. The London PM gold price averaged $1,257 per ounce in 2017, $1,250 per ounce in 2016 and $1,160 per ounce in 2015. The London PM gold price was $1,297 per ounce on December 31, 2017, and $1,345 per ounce on January 31, 2018. The Metals Week Molybdenum Dealer Oxide weekly average price averaged $8.21 per pound in 2017, $6.47 per pound in 2016 and $6.66 per pound in 2015. The Metals Week Molybdenum Dealer Oxide weekly average price was $10.15 per pound on December 31, 2017, and $11.87 per pound on January 31, 2018. As further discussed in Notes 4 and 5, non-cash charges for inventory adjustments totaled $8 million in 2017 and $36 million in 2016 primarily for molybdenum, and $338 million in 2015 for copper and molybdenum, and long-lived mining asset impairments totaled $37 million in 2015. Declines in copper, gold and/or molybdenum prices could result in additional metals inventory adjustments and impairment charges for our long-lived assets. Other events that could result in impairment of our long-lived assets include, but are not limited to, decreases in estimated proven and probable mineral reserves and any event that might have a material adverse effect on mine production costs. Our debt and other financial commitments may limit our financial and operating flexibility. At December 31, 2017, our total consolidated debt was $13.1 billion (see Note 8) and our total consolidated cash was $4.4 billion. We also have various other financial commitments, including reclamation and environmental obligations, take-or-pay contracts and leases. For further information, refer to the risk factor below relating to mine closure and reclamation regulations and plugging and abandonment obligations related to our remaining oil and gas properties. Our level of indebtedness and other financial commitments could have important consequences to our business, including the following: • Limiting our flexibility in planning for, or reacting to, changes in the industry in which we operate; • Increasing our vulnerability to general adverse economic and industry conditions; • Limiting our ability to fund future working capital, capital expenditures and/or material contingencies, to engage in future development activities, or to otherwise realize the value of our assets and opportunities fully because of the need to dedicate a substantial portion of our cash flows from operations to payments on our debt; • Requiring us to sell assets to reduce debt; or • Placing us at a competitive disadvantage compared to our competitors that have less debt and/or fewer financial commitments. Any failure to comply with the financial and other covenants in our debt agreements may result in an event of default that would allow the creditors to accelerate maturities of the related debt, which in turn may trigger cross-acceleration or cross-default provisions in other debt agreements. Our available cash and liquidity may not be sufficient to fully repay borrowings under our debt instruments that are accelerated upon an event of default. From August 2015 through November 2016, we sold 326.5 million shares of our common stock under registered at-the-market equity programs, which generated $3.5 billion in gross proceeds (refer to Note 10). In addition, during 2016, we issued 48.1 million shares of our common stock in connection with the settlement of two drilling rig contracts (refer to Note 13) and 27.7 million shares of our common stock in exchange for $369 million of FCX senior notes (refer to Note 10). Any additional issuance of equity capital to fund operations, reduce debt, improve our financial position or for other purposes, may have a negative impact on our stock price. As of January 31, 2018, our senior unsecured debt was rated “BB-“ with a stable outlook by Standard & Poor’s (S&P), “BB+” with a negative outlook by Fitch Ratings (Fitch), and “Ba2” with a stable outlook by Moody’s Investors Service (Moody’s). There is no assurance that our credit ratings will not be downgraded in the future. Mine closure and reclamation regulations impose substantial costs on our operations and include requirements that we provide financial assurance supporting those obligations. We also have plugging and abandonment obligations related to our remaining oil and gas properties, and are required to provide bonds or other forms of financial assurance in connection with those properties. Changes in or the failure to comply with these requirements could have a material adverse effect on us. We are required by U.S. federal and state laws and regulations to provide financial assurance sufficient to allow a third party to implement approved closure and reclamation plans for our mining properties if we are unable to do so. The U.S. Environmental Protection Agency (EPA) and state agencies may also require financial assurance for investigation and remediation actions that are required under settlements of enforcement actions under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) or similar state laws. Refer to Note 12 for additional information regarding our financial assurance obligations. With respect to our mining operations, most of our financial assurance obligations are imposed by state laws that vary significantly by jurisdiction, depending on how each state regulates land use and groundwater quality. Although Section 108(b) of CERCLA has required EPA to identify classes of facilities that must establish evidence of financial responsibility since it was adopted in 1980, currently there are no financial assurance requirements for active mining operations under CERCLA. In August 2014, several environmental organizations initiated litigation against EPA to require it to set a schedule for adopting financial assurance regulations under CERCLA governing the hard rock mining industry. EPA and the environmental organizations reached a joint agreement and submitted it to the U.S. Court of Appeals for the District of Columbia Circuit for approval. Notwithstanding industry objections, the court approved the agreement on January 29, 2016, thereby requiring EPA to propose financial assurance regulations for the hard rock mining industry by December 1, 2016, and to provide notice of its final action by December 1, 2017. The proposed regulations were published on January 11, 2017, and the public comment period closed on July 11, 2017. The proposed rules were vigorously opposed by the mining industry, other industry commenters, and states and other federal agencies that have mine closure and reclamation programs. We and others in the industry submitted comments to inform EPA that, if adopted without material modification, the rules would impose financial responsibility obligations on U.S. hard rock mining operations that are unnecessary, duplicative of existing state and other federal requirements, and unreasonable. Our initial calculations also suggested that the financial responsibility amounts would be difficult, if not impossible, for us and others to meet with corporate resources, and would be extremely expensive, if not impossible, to finance with third-party financial instruments such as letters of credit, bonds or insurance. On December 1, 2017, EPA announced that it was withdrawing its proposed rules and would not issue any final financial assurance regulations for the hard rock mining industry. EPA indicated that its decision was based on its interpretation of the statute and analysis of its record developed for this rule making, including comments on federal and state regulatory controls governing the hard rock mining sector, and federal and state financial responsibility requirements. Environmental organizations have announced that they will file suit challenging EPA’s decision after the final decision has been published in the Federal Register. We and others in the industry will continue to participate in the legal process and oppose any re-proposal of rules similar to what EPA proposed on December 1, 2016, as a re-proposal of similar rules would severely harm the international competitiveness of the U.S. hard rock mining industry and would materially and adversely affect our cash flows, results of operations and financial condition. We are also subject to financial assurance requirements in connection with our remaining oil and gas properties under both state and federal laws, including financial responsibility required under the Oil Pollution Act of 1990 to cover containment and cleanup costs resulting from an oil spill. In 2016, the U.S. Bureau of Ocean Energy Management (BOEM) issued revised requirements for lessees operating in federal waters to secure the cost of plugging, abandoning, decommissioning and/or removing wells, platforms and pipelines at the end of production. The revised requirements eliminate previously provided waivers from requirements to post security. In early 2017, the BOEM announced a delay in the implementation of certain aspects of the rules pending further review. The BOEM has been discussing the rules with industry representatives, and implementation remains on hold at this time. If implemented, the new requirements could require us to post security in the form of bonds or similar assurances. The cost for bonds or other forms of assurances can be substantial, and there is no assurance that they can be obtained in all cases. As of December 31, 2017, our financial assurance obligations totaled $1.2 billion for closure and reclamation/restoration costs of U.S. mining sites, and $0.6 billion for plugging and abandonment obligations of our remaining oil and gas properties (refer to Note 12). A substantial portion of our financial assurance obligations are satisfied by FCX and subsidiary guarantees and financial capability demonstrations. Our ability to continue to provide guarantees and financial capability demonstrations depends on state and other regulatory requirements, our financial performance and our financial condition. Other forms of assurance, such as letters of credit and surety bonds, are costly to provide and, depending on our financial condition and market conditions, may be difficult or impossible to obtain. Failure to provide the required financial assurance could result in the closure of the affected properties. Refer to Notes 1 and 12, for further discussion of our environmental and asset retirement obligations. Unanticipated litigation or negative developments in pending litigation or with respect to other contingencies could have a material adverse effect on our cash flows, results of operations and financial condition. We are involved in numerous legal proceedings and subject to other contingencies that have arisen or may arise in the ordinary course of our business or are associated with environmental issues arising from legacy operations conducted over the years by Freeport Minerals Corporation (FMC) and its affiliates, including those described in Note 12 and in Item 3. “Legal Proceedings” involving matters such as remediation, restoration and reclamation of environmental contamination, claims of personal injury or property damage arising from such contamination or from exposure to substances such as lead, arsenic, asbestos, talc and other allegedly toxic substances, disputes over water rights, and disputes with foreign governments or regulatory authorities over royalties, taxes, rights and obligations under concession or other agreements, or other matters. We are also involved periodically in other reviews, inquiries, investigations and other proceedings initiated by or involving government agencies, some of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In addition, from time to time we are involved in disputes over the allocation of environmental remediation obligations at Superfund and other sites. The outcome of litigation is inherently uncertain and adverse developments or outcomes can result in significant monetary damages, penalties, other sanctions or injunctive relief against us, limitations on our property rights, or regulatory interpretations that increase our operating costs. Management does not believe, based on currently available information, that the outcome of any individual legal proceeding will have a material adverse effect on our financial condition, although individual or cumulative outcomes could be material to our operating results for a particular period, depending on the nature and magnitude of the outcome and the operating results for the period. With respect to the asbestos exposure cases described in Note 12, there has been an increase in the number of cases against FMC and certain affiliates alleging exposure to talc contaminated with asbestos and to talc that is not alleged to be contaminated with asbestos. There have been a number of large jury awards in single plaintiff cases primarily brought by consumers against makers of common consumer products containing talc and alleging serious health risks, including mesothelioma and ovarian cancer allegedly associated with long-term use of such products. Prior affiliates were involved in talc mining, and some of those affiliates have been named as defendants in some of those cases. We have indemnification rights against a successor to those businesses, and the successor has acknowledged those indemnification obligations, subject to certain reservations, and has taken responsibility for all cases we have tendered to it. However, the indemnitor may have limited financial resources and limited amounts of insurance available to meet those obligations. International risks Our international operations are subject to political, social and geographic risks of doing business in countries outside the U.S. We are a U.S.-based mining company with substantial assets located outside of the U.S. We conduct international mining operations in Indonesia, Peru and Chile. Accordingly, in addition to the usual risks associated with conducting business in countries outside the U.S., our business may be adversely affected by political, economic and social uncertainties in each of these countries. Risks of conducting business in countries outside of the U.S. include: • Renegotiation, cancellation or forced modification of existing contracts; • Expropriation or nationalization of property; • Changes in the host country’s laws, regulations and policies, including those relating to labor, taxation, royalties, divestment, imports, exports, trade regulations, currency and environmental matters, which because of rising “resource nationalism” in countries around the world, may impose increasingly onerous requirements on foreign operations and investment; • Political instability, bribery, extortion, corruption, civil strife, acts of war, guerrilla activities, insurrection and terrorism; • Changes in the aspirations and expectations of local communities in which we operate with respect to our contributions to employee health and safety, infrastructure and community development and other factors that may affect our social license to operate, all of which lead to increased costs; • Changes in U.S. trade, tax, immigration or other policies that may harm relations with foreign countries or result in retaliatory policies; • Foreign exchange controls and movements in foreign currency exchange rates; and • The risk of having to submit to the jurisdiction of an international court or arbitration panel or having to enforce the judgment of an international court or arbitration panel against a sovereign nation within its own territory. Our insurance does not cover most losses caused by the above described risks. Accordingly, our exploration, development and production activities outside of the U.S. may be substantially affected by many unpredictable factors beyond our control, some of which could have a material adverse effect on our cash flows, results of operations and financial condition. Our international operations must comply with the U.S. Foreign Corrupt Practices Act and similar anti-corruption and anti-bribery laws of the other jurisdictions in which we operate. There has been a substantial increase in the global enforcement of these laws in recent years. Any violation of those laws could result in significant criminal or civil fines and penalties, litigation, and loss of operating licenses or permits, and may damage our reputation, which could have a material adverse effect on our cash flows, results of operations and financial condition. We are involved in several significant tax proceedings and other tax disputes with the Indonesian and Peruvian tax authorities (refer to Note 12 for further discussion of these matters). Other risks specific to certain countries in which we operate are discussed in more detail below. Because our Grasberg mining operation in Indonesia is a significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties in Indonesia. Our mining operations in Indonesia are conducted by our subsidiary PT Freeport Indonesia (PT-FI) pursuant to a Contract of Work (COW) with the Indonesian government. Maintaining a good working relationship with the Indonesian government is important to us because of the significance of our Indonesia operations to our business, and because our mining operations there are among Indonesia’s most significant business enterprises. Partially because of their significance to Indonesia’s economy, the environmentally sensitive area in which they are located, and the number of people employed, our Indonesia operations have been the subject of political debates and of criticism in the Indonesian press, and have been the target of protests and occasional violence. For further discussion of the history of PT-FI’s COW, refer to Note 13. The initial term of PT-FI’s COW expires in 2021, but the COW explicitly provides that it can be extended for two 10-year periods subject to Indonesian government approval, which cannot be withheld or delayed unreasonably. PT-FI has been engaged in discussions with officials of the Indonesian government since 2012 regarding various provisions of its COW, including extending its term. Notwithstanding provisions in the COW prohibiting it from doing so, the Indonesian government has sought to modify existing mining contracts, including PT-FI’s COW, to address provisions contained in the mining law enacted in 2009 and mining regulations adopted thereunder, including provisions that conflict with the COW, such as the size of contract concessions, government revenues, domestic processing of minerals, divestment, provision of local goods and services, conversion from a COW to a licensing framework for extension periods, and a requirement that extensions may be applied for only within two years prior to a COW’s expiration. Regulations published pursuant to the 2009 mining law in January 2014 imposed, among other things, a progressive export duty on copper concentrate and restricted exports of copper concentrate and anode slimes (a by-product of the copper refining process containing metals, including gold) after January 12, 2017. Despite PT-FI’s rights under its COW to export concentrate without the payment of duties, PT-FI was unable to obtain administrative approval for exports and operated at approximately half of its capacity from mid-January 2014 through July 2014. In July 2014, PT-FI entered into a Memorandum of Understanding (MOU) with the Indonesian government, in which, subject to concluding an agreement to extend PT-FI’s operations beyond 2021 on acceptable terms, PT-FI agreed to construct new smelter capacity in Indonesia and to divest an additional 20.64 percent interest at fair value. Under the MOU, PT-FI provided a $115 million assurance bond to support its commitment for smelter development, agreed to pay higher royalty rates and agreed to pay export duties until certain smelter development milestones were met. The MOU also anticipated an amendment of the COW within six months to address other matters. In January 2015, the MOU was extended to July 25, 2015, and it expired on that date. The Indonesian government has continued to impose the increased royalty rates, export duties and smelter assurance bond. In October 2015, the Indonesian government provided a letter of assurance to PT-FI indicating that it would revise regulations allowing it to approve the extension of PT-FI’s operations beyond 2021, and provide the same rights and the same level of legal and fiscal certainty provided under the current COW. In January and February 2017, the Indonesian government issued new regulations pursuant to the 2009 mining law to address exports of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. The new regulations permit the continuation of copper concentrate exports for a five-year period through January 2022, subject to various conditions, including conversion from a contract of work to a special mining license (known as an IUPK, which does not provide the same level of fiscal and legal protections as PT-FI’s COW, which remains in effect), a commitment to the completion of smelter construction in five years and payment of export duties to be determined by the Ministry of Finance. In addition, the new regulations enable application for extension of mining rights five years before expiration of the IUPK and require foreign IUPK holders to divest 51 percent to Indonesian interests no later than the tenth year of production. Export licenses would be valid for one-year periods, subject to review every six months, depending on smelter construction progress. Following the issuance of the January and February 2017 regulations and discussions with the Indonesian government, PT-FI advised the government that it was prepared to convert its COW to an IUPK, subject to extension of its long-term mining rights to 2041 and obtaining an investment stability agreement providing contractual rights with the same level of legal and fiscal certainty provided under its COW, and provided that the COW would remain in effect until it is replaced by a mutually satisfactory alternative. PT-FI also committed to commence construction of a new smelter during a five-year time frame after approval of the extension of its long-term mining rights. On January 12, 2017, PT-FI suspended exports in response to Indonesian regulations in effect at the time. In addition, as a result of labor disturbances and a delay in the renewal of its export license for anode slimes, PT Smelting’s (PT-FI’s 25-percent-owned copper smelter and refinery located in Gresik, Indonesia) operations were shut down from mid-January 2017 until early March 2017. On February 10, 2017, PT-FI was forced to suspend production as a result of limited storage capacity at PT-FI and PT Smelting. On April 21, 2017, the Indonesian government issued a permit to PT-FI that allowed exports to resume for a six-month period, and PT-FI commenced export shipments. In mid-February 2017, pursuant to the COW’s dispute resolution provisions, PT-FI provided formal notice to the Indonesian government of an impending dispute listing the government’s breaches and violations of the COW as described in the risk factor below “PT-FI’s COW may be subject to termination if we do not comply with our contractual obligations, and if a dispute arises, we may have to submit to the jurisdiction of an international arbitration panel.” As a result of the 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT-FI took actions to adjust its cost structure, slow investments in its underground development projects and new smelter, and place certain of its workforce on furlough programs. In late March 2017, the Indonesian government amended the regulations to enable PT-FI to retain its COW until replaced with an IUPK accompanied by an investment stability agreement, and to grant PT-FI a temporary IUPK. In April 2017, PT-FI entered into a MOU with the Indonesian government confirming that the COW would continue to be valid and honored until replaced by a mutually agreed IUPK and investment stability agreement. In the MOU, PT-FI agreed to continue to pay a 5.0 percent export duty during this period. Subsequently, the Customs Office of the Minister of Finance refused to recognize the 5.0 percent export duty under the MOU and imposed a 7.5 percent export duty under the Ministry of Finance regulations. Since resuming exports on April 21, 2017, PT-FI has paid the 7.5 percent export duty under protest while the matter is pending in Indonesia Tax Court proceedings. Following a framework understanding reached in August 2017, the parties have engaged in negotiation and documentation of a special mining license and accompanying documentation for assurances on legal and fiscal terms to replace the COW while providing PT-FI with long-term mining rights through 2041. In addition, the IUPK would provide that PT-FI would construct a new smelter in Indonesia within five years of reaching a definitive agreement and include agreement for the divestment of 51 percent of the project area interests to Indonesian participants at fair market value. Execution of a definitive agreement will require approval by our Board of Directors (the Board) and our joint venture partner, Rio Tinto plc (Rio Tinto), as well as the modification or revocation of current regulations and the implementation of new regulations by the Indonesian government. In late 2017, the Indonesian government (including the regional government of Papua Province and Mimika Regency) and PT Indonesia Asahan Aluminium (Inalum), a state-owned enterprise, which will lead the government’s consortium of investors, agreed to form a special purpose company to acquire Grasberg project area interests. Inalum is wholly owned by the Indonesian government and currently holds 9.36 percent of PT-FI’s outstanding common stock. We are engaged in discussions with Inalum and Rio Tinto regarding potential arrangements that would result in the Inalum consortium acquiring interests that would meet the Indonesian government’s 51 percent ownership objective in a manner satisfactory to all parties, and in a structure that would provide for continuity of our management of PT-FI’s operations and governance of the business. The parties continue to negotiate documentation on a comprehensive agreement for PT-FI’s extended operations and to reach agreement on timing, process and governance matters relating to the divestment. The parties have a mutual objective of completing negotiations and the required documentation during the first half of 2018. In December 2017, PT-FI was granted an extension of its temporary IUPK through June 30, 2018, to enable exports to continue while negotiations on a definitive agreement proceed. In February 2018, PT-FI received an extension of its export license through February 15, 2019. On February 15, 2018, PT Smelting submitted an application to renew its anode slimes export license, which expires March 1, 2018. Until a definitive agreement is reached, PT-FI has reserved all rights under its COW, including dispute resolution procedures. We cannot predict whether PT-FI will be successful in reaching a satisfactory agreement on the terms of its long-term mining rights. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term rights, we intend to reduce or defer investments significantly in underground development projects, which would have a material adverse effect on our future production, cash flow, results of operations and financial position, and could result in asset impairments, inventory write downs, difficulty in meeting covenants under our credit facilities, and a significant reduction in our reported mineral reserves. In 2018, Indonesia will hold elections for legislators at the provincial and district levels, including the Province of Papua and Mimika Regency, and national legislative elections will be held in 2019. The presidential election will be held in April 2019, with a run-off in August 2019, if required. Political considerations leading up to these elections could impact our progress in reaching a definitive agreement with the Indonesian government on our long-term rights and the outcome of these elections could affect the country’s policies pertaining to foreign investment. PT-FI’s COW may be subject to termination if we do not comply with our contractual obligations, and if a dispute arises, we may have to submit to the jurisdiction of an international arbitration panel. PT-FI’s COW was entered into under Indonesia’s 1967 Foreign Capital Investment Law, which provides guarantees of remittance rights and protection against nationalization. The COW may be subject to termination by the Indonesian government if we do not satisfy our contractual obligations, which include the payment of royalties and taxes to the government and the satisfaction of certain mining, environmental, safety and health requirements. Recently adopted Indonesian laws and regulations conflict with the mining rights established under the COW. Although the COW grants to PT-FI the unencumbered right to operate in accordance with the COW, government agencies have sought and continue to seek to impose additional restrictions on PT-FI that could affect exploration and operating requirements. For further discussion, refer to the above risk factor “Because our Grasberg mining operation in Indonesia is a significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties in Indonesia.” PT-FI’s COW requires that disputes with the Indonesian government be submitted to international arbitration. In mid-February 2017, pursuant to the COW’s formal dispute resolution provisions, PT-FI provided formal notice to the Indonesian government of an impending dispute listing the government’s breaches and violations of the COW, including, but not limited to, the following: • Restrictions on PT-FI’s basic right to export mining products in violation of the COW; • Imposition of export duties other than those taxes and other charges expressly provided for in the COW; • Imposition of surface water taxes in excess of the restrictions imposed by the COW (refer to Note 12 for further discussion of these assessments); • Requirement for PT-FI to build a smelter, while such requirements are not contained in the COW; • Unreasonable withholding and delay in granting approval of two successive ten-year extensions of the term of the COW; and • Imposition of divestment requirements that are not provided for in the COW. If the dispute is not resolved, PT-FI may commence arbitration under the United Nations Commission on International Trade Law Arbitration Rules to enforce all provisions of the COW and seek damages, specifically in respect of the issuance of the January 11, 2017, regulations which are not in accordance with honoring the contractual commitments of the Indonesian government and PT-FI under the COW. The arbitration proceedings would take place in Jakarta, Indonesia, and for limited purposes, would be overseen by the Indonesian courts under the Indonesian Arbitration Act. The international arbitration process is complex and could take considerable time to complete, and there is no assurance that we will prevail. If we prevail, we will face the additional risk of having to enforce the judgment of an international arbitration panel against Indonesia within its own territory. Additionally, our operations may be materially and adversely affected while resolution of a dispute is pending. At times, certain government officials and others in Indonesia have questioned the validity of contracts entered into by the Indonesian government prior to May 1998 (i.e., during the Suharto regime, which lasted over 30 years), including PT-FI’s COW, which was signed in December 1991. We cannot provide assurance that the validity of, or our compliance with, the COW will not be challenged for political or other reasons. We will not mine all of our ore reserves in Indonesia before the initial term of our COW expires. Our proven and probable ore reserves in Indonesia reflect estimates of minerals that can be recovered through the end of 2041, and our current mine plan and planned operations are based on the assumption that we will receive the two 10-year extensions. As a result, we will not mine all of these ore reserves during the initial term of the current COW. Prior to the end of 2021, we expect to mine 12 percent of aggregate proven and probable recoverable ore at December 31, 2017, representing 18 percent of PT-FI’s share of recoverable copper reserves and 29 percent of its share of recoverable gold reserves. There can be no assurance that the Indonesian government will approve our COW extensions. For further discussion, refer to the above risk factors “Because our Grasberg mining operation in Indonesia is a significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties in Indonesia” and “PT-FI’s COW may be subject to termination if we do not comply with our contractual obligations, and if a dispute arises, we may have to submit to the jurisdiction of an international arbitration panel.” Operational risks Our mining operations are subject to operational risks that could adversely affect our business. Our mines are very large in scale and, by their nature are subject to significant operational risks, some of which are outside of our control, and many of which are not covered fully, or in some cases even partially, by insurance. These operational risks, which could materially and adversely affect our business, operating results and cash flow, include earthquakes, rainstorms, floods, and other natural disasters; equipment failures; accidents; wall failures and rock slides in our open-pit mines, and structural collapses of our underground mines or tailings impoundments; and lower than expected ore grades or recovery rates. The waste rock (including overburden) and tailings produced in our mining operations represent our largest volume of waste material. Managing the volume of waste rock and tailings presents significant environmental, safety and engineering challenges and risks. We maintain large leach pads and tailings impoundments containing viscous material, which are effectively large dams that must be engineered, constructed and monitored to assure structural stability and avoid leakages or structural collapse. Our tailings impoundments in arid areas must have effective programs to suppress fugitive dust emissions, and we must effectively monitor and treat acid rock drainage at all of our operations. In Indonesia, we use a river transport system for tailings management, which presents other risks, as discussed below. The failure of tailings and other impoundments at any of our mining operations could cause severe property and environmental damage and loss of life, and we apply significant financial resources and both internal and external technical resources to the effective, safe management of all those facilities. The importance of careful design, management and monitoring of large impoundments was emphasized in recent years by large scale tailings dam failures at unaffiliated mines, which caused extensive property and environmental damage and resulted in the loss of life. Our tailing stewardship program, which involves designated Engineers of Record and periodic oversight by external Tailing Review Boards at numerous operations, complies with the Tailings Governance Framework adopted in December 2016 by International Council on Mining and Metals. We continue to augment our existing practices in an effort to reduce the risk of catastrophic failure of tailings storage facilities. Labor unrest, violence, activism and civil and religious strife could disrupt our operations and may adversely affect our business, financial condition, results of operations and prospects. As of December 31, 2017, approximately 40 percent of our global labor force was covered by collective bargaining agreements and approximately 15 percent of our global labor force was covered by agreements that have expired and are currently being negotiated or will expire during 2018. Labor agreements are negotiated on a periodic basis, and may not be renewed on reasonably satisfactory terms to us or at all. If we do not successfully negotiate new collective bargaining agreements with our union workers, we may incur prolonged strikes and other work stoppages at our mining operations, which could adversely affect our financial condition and results of operations. Additionally, if we enter into a new labor agreement with any union that significantly increases our labor costs relative to our competitors, our ability to compete may be materially and adversely affected. Refer to Items 1. and 2., “Business and Properties,” for additional information regarding labor matters, and expiration dates of such agreements. We could also experience labor disruptions such as work stoppages, work slowdowns, union organizing campaigns, strikes, or lockouts that could adversely affect our operations. For example, during third-quarter 2016, PT-FI experienced labor productivity issues and a 10-day work stoppage that began in late September 2016. These labor productivity issues continued during fourth-quarter 2016 and the first half of 2017. Significant reductions in productivity or protracted work stoppages at one or more of our operations could significantly reduce our production and sales volumes, which could adversely affect our cash flow, results of operations and financial condition. Indonesia has long faced separatist movements and civil and religious strife in a number of provinces. Several separatist groups have sought increased political independence for the province of Papua, where our Grasberg minerals district is located. In Papua, there have been sporadic attacks on civilians by separatists and sporadic but highly publicized conflicts between separatists and the Indonesian military and police. In addition, illegal miners have periodically clashed with police who have attempted for years to move them away from our facilities. Social, economic and political instability in Papua could materially and adversely affect us if it results in damage to our property or interruption of our Indonesia operations. In 2009, a series of shooting incidents occurred within the PT-FI project area, including along the road leading to our mining and milling operations. The shooting incidents continued on a sporadic basis through January 11, 2015. During this time, there were 20 fatalities and 59 injuries to our employees, contractor employees, government security personnel and civilians. The next shooting incident occurred in August 2017, and a series of shooting incidents has continued on a sporadic basis through February 16, 2018. From August 2017 through February 16, 2018, there have been 24 shooting incidents within the PT-FI project area and five shooting incidents in nearby areas, which resulted in 16 injuries to PT-FI’s workforce and one civilian injury. Additionally, during law enforcement actions, government security personnel incurred seven injuries and two fatalities. The safety of our workforce is a critical concern, and PT-FI continues to work with the Indonesian government to address security issues. The investigation of these incidents is ongoing. We also continue to limit the use of the road leading to our mining and milling operations to secured convoys, including transport of personnel by armored vehicles in designated areas. We cannot predict whether additional incidents will occur that could disrupt or suspend our Indonesian operations. If other disruptive incidents occur, they could adversely affect our results of operations and financial condition in ways that we cannot predict at this time. Our mining operations depend on the availability of secure water supplies. Our mining operations require physical availability and secure legal rights to significant quantities of water for mining and ore processing activities, and related support facilities. Most of our North America and South America mining operations are in areas where competition for water supplies is significant. Continuous production at our mines is dependent on many factors, including our ability to maintain our water rights and claims, and the continuing physical availability of the water supplies. In Arizona, where our operations use both surface and ground water, we are a participant in an active general stream adjudication in which the Arizona courts have been attempting, for over 40 years, to quantify and prioritize surface water claims for the Gila River, one of the state’s largest river systems, which primarily affects our Morenci, Safford and Sierrita mines. The adjudication is addressing the state law claims of thousands of competing users, including us, as well as significant federal water claims that are potentially adverse to the state law claims of both surface water and groundwater users. Groundwater is treated differently from surface water under Arizona law, which historically allowed landowners to pump subsurface water, subject only to the requirement of putting it to “reasonable use.” However, court decisions in the adjudication have concluded that underground water is often hydrologically connected to surface water so that it actually is surface water and is therefore subject to the Arizona doctrine of prior appropriation, as a result of which it would be subject to the adjudication and potentially unavailable to groundwater pumpers in the absence of valid surface water claims, which historic groundwater pumpers typically do not have. Any re-characterization of groundwater as surface water could affect the ability of consumers, farmers, ranchers, municipalities, and industrial users like us to continue to access water supplies that have been relied on for decades. Because we are a user of both groundwater and surface water in Arizona, we are an active participant in the adjudication proceeding. Water for our Cerro Verde operation in Peru comes from renewable sources through a series of storage reservoirs on the Rio Chili watershed that collects water primarily from seasonal precipitation. As a result of occasional drought conditions, temporary supply shortages are possible that could affect our Cerro Verde operations. In January 2016, the Peruvian government declared a temporary state of emergency with respect to the water supply in the Rio Chili Basin because of drought conditions. As a result, the Cerro Verde water rights from the Rio Chili were temporarily decreased during February 2016. Water for our El Abra mining operation in Chile comes from the continued pumping of groundwater from the Salar de Ascotán aquifer. In 2010, El Abra obtained regulatory approval for the continued pumping of groundwater from the Salar de Ascotán aquifer for its sulfide processing plant, which began operations in 2011. The agreement to pump from this aquifer is subject to continued monitoring of the aquifer level to ensure that environmentally sensitive areas are not impacted by our pumping. If impact occurs, we would have to reduce pumping to restore water levels, which could have an adverse effect on production from El Abra. Although we typically have sufficient water for our Indonesian operations, lower rainfall could affect our water supply availability from time to time. Although each of our mining operations currently has access to sufficient water supplies to support current operational demands, as discussed above some supplies are subject to adjudication proceedings, the outcome of which we cannot predict, and the availability of additional supplies that may be required for potential future expansions is uncertain. While we are taking actions to acquire additional back-up water supplies, such supplies may not be available at acceptable cost, or at all, so that the loss of a water right or currently available water supply could force us to curtail operations or force premature closures, thereby increasing and/or accelerating costs or foregoing profitable operations. In addition to the usual risks encountered in the mining industry, our Indonesia mining operations involve additional risks because they are located in very remote areas and on unusually difficult terrain. The Grasberg minerals district is located in steep mountainous terrain in a remote area of Indonesia. These conditions have required us to overcome special engineering difficulties and develop extensive infrastructure facilities. In addition, the area receives considerable rainfall, which has led to periodic floods and mudslides. The mine site is also in an active seismic area and has experienced earth tremors from time to time. Our insurance may not sufficiently cover an unexpected natural or operating disaster. Underground mining operations can be particularly dangerous, and in May 2013, a tragic accident, which resulted in 28 fatalities and 10 injuries, occurred at PT-FI when the rock structure above the underground ceiling of a training facility collapsed. PT-FI temporarily suspended mining and processing activities at the Grasberg complex to conduct inspections and resumed open-pit mining and concentrating activities on June 24, 2013, and underground operations on July 9, 2013. No assurance can be given that similar events will not occur in the future. We must continually replace reserves depleted by production, but our exploration activities may not result in additional discoveries. Our existing mineral reserves will be depleted over time by production from our operations. Because our profits are primarily derived from our mining operations, our ability to replenish our mineral reserves is essential to our long-term success. Our exploration projects involve many risks, require substantial expenditures and may not result in the discovery of additional deposits that can be produced profitably. We may not be able to discover, enhance, develop or acquire reserves in sufficient quantities to maintain or grow our current reserve levels, which could negatively affect our cash flow, results of operations and financial condition. Development projects are inherently risky and may require more capital than anticipated, which could adversely affect our business. Consolidated capital expenditures are expected to approximate $2.1 billion for 2018, including $1.2 billion for major projects primarily associated with underground development activities in the Grasberg minerals district and development of the Lone Star oxide project. Refer to the risk factor “Because our Grasberg mining operation in Indonesia is a significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties in Indonesia” for further discussion of regulatory matters in Indonesia that may impact future investments in PT-FI’s underground development projects. There are many risks and uncertainties inherent in all development projects. The economic feasibility of development projects is based on many factors, including the accuracy of estimated reserves, estimated capital and operating costs, and estimated future prices of the relevant commodity. The capital expenditures and time required to develop new mines or other projects are considerable, and changes in costs or timing can adversely affect project economics. New development projects have no operating history upon which to base estimates of future cash flow. The actual costs, production rates and economic returns of our development projects may differ materially from our estimates, which may have a material adverse impact on our cash flows, results of operations and financial condition. Our operations are subject to extensive regulations, some of which require permits and other approvals. These regulations increase our costs and in some circumstances may delay or suspend our operations. Our operations are subject to extensive and complex laws and regulations that are subject to change and to changing interpretation by governmental agencies and other bodies vested with broad supervisory authority. As a natural resource company, compliance with environmental legal requirements is an integral and costly part of our business. For additional information, see “Environmental risks” below. We are also subject to extensive regulation of worker health and safety, including the requirements of the U.S. Occupational Safety and Health Act and similar laws of other jurisdictions. In the U.S., the operation of our mines is subject to regulation by the U.S. Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977. MSHA inspects our mines on a regular basis and issues citations and orders when it believes a violation has occurred. If such inspections result in an alleged violation, we may be subject to fines and penalties and, in instances of alleged significant violations, our mining operations could be subject to temporary or extended closures. Many other governmental bodies regulate other aspects of our operations, and our failure to comply with these legal requirements can result in substantial penalties. In addition, new laws and regulations or changes to existing laws and regulations and new interpretations of existing laws and regulations by courts or regulatory authorities occur regularly, but are difficult to predict. Any such variations could have a material adverse effect on our cash flow, results of operations and financial condition. Our business may be adversely affected by information technology disruptions. Cybersecurity incidents are increasing in frequency, evolving in nature and include, but are not limited to, installation of malicious software, unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. We have experienced cybersecurity incidents in the past and may experience them in the future. We believe we have implemented appropriate measures to mitigate potential risks. However, given the unpredictability of the timing, nature and scope of information technology disruptions, we could be subject to manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on our cash flow, results of operations and financial condition. Environmental risks Our operations are subject to complex, evolving and increasingly stringent environmental laws and regulations. Compliance with environmental regulatory requirements involves significant costs and may constrain existing operations or expansion opportunities. Our operations, both in the U.S. and internationally, are subject to extensive environmental laws and regulations governing the generation, storage, treatment, transportation and disposal of hazardous substances; solid waste disposal; air emissions; wastewater discharges; remediation, restoration and reclamation of environmental contamination, including mine closures and reclamation; well plug and abandonment requirements; protection of endangered and protected species and designation of critical habitats; and other related matters. In addition, we must obtain regulatory permits and approvals to start, continue and expand operations. Our Miami, Arizona, smelter processes approximately half of the aggregate copper concentrate produced by our North America copper mines. EPA regulations required us to invest approximately $230 million in new pollution control equipment to reduce sulfur dioxide (SO2) to meet both regional haze requirements and to allow the state of Arizona to demonstrate compliance with EPA’s SO2 ambient air quality standards. The new SO2 pollution control equipment was operational as of the January 1, 2018, deadline imposed by EPA. We also obtained regulatory approvals to increase the smelter’s annual throughput to one million tons of copper concentrate, which has the additional benefit of increasing the production of sulphuric acid for use in our copper leach operations. Laws such as CERCLA and similar state laws may expose us to joint and several liability for environmental damages caused by our operations, or by previous owners or operators of properties we acquired or are currently operating or at sites where we sent materials for processing, recycling or disposal. As discussed in more detail in the next risk factor, we have substantial obligations for environmental remediation on mining properties previously owned or operated by FMC and certain of its affiliates. Noncompliance with these laws and regulations could result in material penalties or other liabilities. In addition, compliance with these laws may from time to time result in delays in or changes to our development or expansion plans. Compliance with these laws and regulations imposes substantial costs, which we expect will continue to increase over time because of increased regulatory oversight, adoption of increasingly stringent environmental standards, as well as other factors. New or revised environmental regulatory requirements are frequently proposed, many of which result in substantially increased costs for our business, including those regarding financial assurance in the financial risk factor above. In addition, in 2015, EPA promulgated rules that could reclassify certain mineral processing materials as “hazardous waste” under the federal Resource Conservation and Recovery Act (RCRA) and subject the industry to significant new and costly waste management requirements. These rules were challenged by multiple parties in court. In a decision issued in 2017, the court agreed in significant part with the challenges raised by the industry parties, and vacated key parts of the rule governing when hazardous process materials are considered “discarded” and, therefore, subject to regulation as solid waste under RCRA and EPA regulatory pronouncements. EPA has also adopted rules that bring remote “tributaries” into the regulatory definition of “waters of the United States” that are protected by the Clean Water Act, thereby imposing significant additional restrictions on land uses in remote areas with only tenuous connections to active waterways. These rules, adopted in 2015, were challenged by multiple states and industry parties. EPA has moved forward to rescind these rules even as litigation challenging them is ongoing. On February 6, 2018, EPA published a final notice delaying the effective date of these rules to February 2020, which will allow it time to reconsider the definition of “waters of the United States.” This final notice has been challenged by states and environmental groups. In the meantime, EPA intends to administer the regulations in place prior to the 2015 rules and has asked for input on how it should define the scope of the Clean Water Act in future rulemaking. Regulations have been considered at various governmental levels to increase federal financial responsibility requirements both for mine closure and reclamation and for oil and gas decommissioning. Adoption of these or similar new environmental regulations or more stringent application of existing regulations may materially increase our costs, threaten certain operating activities and constrain our expansion opportunities. In February 2016, the Department of the Interior’s Fish & Wildlife Service (FWS) adopted final rules that broaden the regulatory definitions of “critical habitat” and “destruction or adverse modification,” both of which are integral to the FWS’s implementation of the Endangered Species Act, which protects federally-listed endangered and threatened species. The new rules increase FWS’s discretion to limit uses of land and water courses that may become suitable habitat for listed species in the future, or that are occasionally used by protected species. The new rules may limit the ability of landowners, including us, to obtain federal permits or authorizations needed for expansion of our operations, and may also affect our ability to obtain, retain or deliver water to some operations. In November 2016, the new rules were challenged in court by a coalition of states. In 2017, the Department of Interior indicated that it intends to reconsider these rules as part of its plans to modernize the implementation of the Endangered Species Act. Also in 2017, the FWS withdrew certain proposed designations of critical habitat affecting our properties. We incurred environmental capital expenditures and other environmental costs (including our joint venture partners’ shares) to comply with applicable environmental laws and regulations that affect our operations totaling $0.5 billion in 2017 and $0.4 billion in each of 2016 and 2015. For 2018, we expect to incur approximately $0.5 billion of aggregate environmental capital expenditures and other environmental costs. The timing and amounts of estimated payments could change as a result of changes in regulatory requirements, changes in scope and costs of reclamation and plug and abandonment activities, the settlement of environmental matters and the rate at which actual spending occurs on continuing matters. We incur significant costs for remediating environmental conditions on properties that have not been operated in many years. FMC and its subsidiaries, and many of their affiliates and predecessor companies, have been involved in exploration, mining, milling, smelting and manufacturing in the U.S. for more than a century. Activities that occurred in the late 19th century and the 20th century prior to the advent of modern environmental laws were not subject to environmental regulation and were conducted before American industrial companies fully understood the long-term effects of their operations on the surrounding environment. With the passage of CERCLA in 1980, companies like FMC became legally responsible for remediating hazardous substances released into the environment from properties owned or operated by them as well as properties where they arranged for disposal of such substances, irrespective of when the release to the environment occurred or who caused it. That liability is often asserted on a joint and several basis with other prior and subsequent owners, operators and arrangers, meaning that each owner or operator of the property is, and each arranger may be, held fully responsible for the remediation, although in many cases some or all of the other responsible parties no longer exist, do not have the financial ability to respond or cannot be found. As a result, because of our acquisition of FMC in 2007, many of the subsidiary companies we now own are potentially responsible for a wide variety of environmental remediation projects throughout the U.S., and we expect to spend substantial sums annually for many years to address those remediation issues. We are also subject to claims where the release of hazardous substances is alleged to have damaged natural resources. At December 31, 2017, we had more than 100 active remediation projects in 26 U.S. states. In addition, FMC and certain affiliates and predecessor companies were parties to agreements relating to the transfer of businesses or properties that contained indemnification provisions relating to environmental matters, and from time to time these provisions become the source of claims against us. At December 31, 2017, we had $1.4 billion recorded in our consolidated balance sheet for environmental obligations attributable to CERCLA or analogous state programs and for estimated future costs associated with environmental matters at closed facilities or closed portions of operating facilities. Our environmental obligation estimates are primarily based upon: • Our knowledge and beliefs about complex scientific and historical facts and circumstances that in many cases occurred many decades ago; • Our beliefs and assumptions regarding the nature, extent and duration of remediation activities that we will be required to undertake and the estimated costs of those remediation activities, which are subject to varying interpretations; and • Our beliefs regarding the requirements that are imposed on us by existing laws and regulations and, in some cases, the clarification of uncertain regulatory requirements that could materially affect our environmental obligation estimates. Significant adjustments to these estimates are likely to occur in the future as additional information becomes available. The actual environmental costs may exceed our current and future accruals for these costs, and any such changes could be material. In addition, remediation standards imposed by EPA and state environmental agencies have generally become more stringent over time and may become even more stringent in the future. Imposition of more stringent remediation standards, particularly for arsenic and lead in soils, poses a risk that additional remediation work could be required at our active remediation sites and at sites that we have already remediated to the satisfaction of the responsible governmental agencies, and may increase the risk of toxic tort litigation. Refer to Note 12 for further discussion of our environmental obligations. Our Indonesia mining operations create difficult and costly environmental challenges, and future changes in environmental laws, or unanticipated environmental impacts from those operations, could require us to incur increased costs. Mining operations on the scale of our Indonesia operations involve significant environmental risks and challenges. Our primary challenge is to dispose of the large amount of crushed and ground rock material, called tailings, that results from the process by which we physically separate the copper-, gold- and silver-bearing materials from the ore that we mine. Our tailings management plan, which has been approved by the Indonesian government, uses the unnavigable river system in the highlands near our mine to transport the tailings to an engineered area in the lowlands where the tailings and natural sediments are managed in a deposition area. Lateral levees have been constructed to help contain the footprint of the tailings and to limit their impact in the lowlands. Another major environmental challenge is managing overburden, which is the rock that must be moved aside in the mining process to reach the ore. In the presence of air, water and naturally occurring bacteria, some overburden can generate acid rock drainage, or acidic water containing dissolved metals that, if not properly managed, can adversely affect the environment. In addition, overburden stockpiles are subject to erosion caused by the large amounts of rainfall, with the eroded stockpile material eventually being deposited in the lowlands tailings management area; this additional material, while predicted in our environmental studies, influences the deposition of finer tailings material in the estuary. In October 2017, Indonesia’s Ministry of Environment and Forestry (the Ministry) notified PT-FI of administrative sanctions related to certain activities the Ministry indicated are not reflected in its environmental permit. The Ministry also notified PT-FI that certain operational activities were inconsistent with factors set forth in its environmental permitting studies and that additional monitoring and improvements need to be undertaken related to air quality, water drainage, treatment and handling of certain wastes, and tailings management. PT-FI has been engaged in a process to update its permits through submissions and dialogue with the Ministry, which began in late 2014. PT-FI believes that it has submitted the required documentation to update its permits, and is in the process of addressing other points raised by the Ministry. From time to time, certain Indonesian government officials have raised questions with respect to our tailings and overburden management plans, including a suggestion that we implement a pipeline system rather than the river transport system for tailings management and disposition. Because our Indonesia mining operations are remotely located in steep mountainous terrain and in an active seismic area, a pipeline system would be costly, difficult to construct and maintain, and more prone to catastrophic failure, and could therefore involve significant potentially adverse environmental issues. Based on our own studies and others conducted by third parties we do not believe that a pipeline system is necessary or practical. Regulation of greenhouse gas emissions and climate change issues may increase our costs and adversely affect our operations. Our copper mining operations require significant energy, principally diesel, electricity, coal and natural gas, most of which is obtained from third parties under long-term contracts. Energy represented 18 percent of our copper mine site operating costs in 2017. Carbon-based energy is a significant input in our operations, although the use of diesel in our haul trucks, coal for power generation, and availability of renewable energy for purchased power varies significantly depending on site production and country-specific circumstances. The potential physical impacts of climate change on our operations are highly uncertain, and would vary by operation based on particular geographic circumstances. As a result of the Paris Agreement reached during the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change in 2015, a number of governments have pledged “Nationally Determined Contributions” to control and reduce greenhouse gas emissions. Although EPA finalized regulations governing greenhouse gas emissions from new, modified, and existing power plants (known as the Clean Power Plan), implementation of these rules has been delayed with the goal of revising the Clean Power Plan. Increased regulation of greenhouse gas emissions may increase our costs. Other risks Our holding company structure may impact our ability to service debt and our stockholders’ ability to receive dividends. We are a holding company with no material assets other than the capital stock and intercompany receivables of our subsidiaries. As a result, our ability to repay our indebtedness and pay dividends is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, loan, debt repayment or otherwise. Our subsidiaries do not have any obligation to make funds available to us to repay our indebtedness or pay dividends. Dividends from subsidiaries that are not wholly owned are shared with other equity owners. Cash at our international operations is also typically subject to foreign withholding taxes upon repatriation into the U.S. In addition, our subsidiaries may not be able to, or be permitted to, make distributions to us or repay loans to us, to enable us to repay our indebtedness or pay dividends. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal restrictions, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries. Certain of our subsidiaries are parties to credit agreements that restrict their ability to make distributions or loan repayments to us if such subsidiary is in default under such agreements, or to transfer substantially all of the assets of such subsidiary without the consent of the lenders. Our rights to participate in any distribution of our subsidiaries’ assets upon their liquidation, reorganization or insolvency would generally be subject to the prior claims of the subsidiaries’ creditors, including any trade creditors. Anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult. Anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult. These provisions: • Authorize the Board to issue preferred stock without stockholder approval and to designate the rights, preferences and privileges of each class; if issued, such preferred stock would increase the number of outstanding shares of our capital stock and could include terms that may deter an acquisition of us; • Establish advance notice requirements for nominations to the Board or for proposals that can be presented at stockholder meetings; • Limit who may call stockholder meetings; and • Require the approval of the holders of two thirds of our outstanding common stock to enter into certain business combination transactions, subject to certain exceptions, including if the consideration to be received by our common stockholders in the transaction is deemed to be a fair price. These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors other than the candidates nominated by the Board. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit large stockholders from consummating a merger with, or acquisition of, us. These provisions may deter an acquisition of us that might otherwise be attractive to stockholders. Item 1B.