FCX, §1A diff (2020 → 2021)

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 plans, projections or expectations relating to ore grades and milling rates; business outlook; production and sales volumes; unit net cash costs; cash flows, capital expenditures, liquidity; operating costs; operating plans; our financial policy; our expectations regarding PT Freeport Indonesia’s (PT-FI) ramp-up of underground mining activities and future cash flows through 2022; PT-FI’s development, financing, construction and completion of a new smelter in Indonesia and possible expansion of the smelter at PT Smelting; our commitments to deliver responsibly produced copper, including plans to implement and validate all of our operating sites under specific frameworks; improvements in operating procedures and technology; exploration efforts and results; development and production activities, rates and costs; tax rates; export quotas and duties; the impact of copper, gold and molybdenum price changes; the impact of deferred intercompany profits on earnings; mineralization and reserve estimates; execution of the settlement agreements associated with the Louisiana coastal erosion cases and talc-related litigation; descriptions of our objectives, strategies, plans, goals or targets, including our net debt target, anticipated improvements in energy efficiency at certain operating sites, and environmental, social and governance (ESG) targets; and future dividend payments, share purchases and sales, including under our Board of Director’s (Board’s) financial policy. 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, expected, 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: Risk Factor Summary Investing in our securities involves a high degree of risk and uncertainties. Below is a summary of the material risk factors associated with an investment in our securities. You should read this summary together with the more detailed description of each risk factor that immediately follows this summary. However, the risk factors described herein are not all of the risks we may face. Other risks not presently known to us or that we currently believe are immaterial may materially affect our business if they occur. Moreover, new risks emerge from time to time. Further, our business may also be affected by additional factors that apply to all companies operating in the U.S. and globally, which have not been included. In addition to this summary and the more detailed description of the risk factors, you should carefully consider other sections of this annual report on Form 10-K, which may include additional factors that could adversely affect our business, prior to investing in our securities. Financial risks •Fluctuations in the market prices of the commodities we produce have caused and may continue to cause significant volatility in our financial performance and in the trading prices of our common stock and debt. Extended declines in the market prices of the commodities we produce could have an adverse effect on our business. •Our debt and other financial commitments may limit our financial and operating flexibility. •The ongoing COVID-19 pandemic and any future pandemic, epidemic, endemic or similar public health threats and resulting negative impact on the global economy and financial markets may have an adverse impact on our business and results of operations, the duration and extent of which is highly uncertain and could be material. •Changes in or the failure to comply with the financial assurance requirements relating to our mine closure reclamation and plugging and abandonment obligations could have a material adverse effect on our business. •Unanticipated litigation or negative developments in pending litigation or with respect to other contingencies could have a material adverse effect on our business. •We may be adversely impacted by increased liabilities and costs related to our defined benefit pension plans. International risks •Our international operations are subject to, and may be adversely affected by, political, economic, social and regional risks of doing business in countries outside the U.S. •Our special mining license (IUPK) may not be extended through 2041 if PT-FI fails to abide by the terms and conditions of the IUPK and applicable laws and regulations. Operational risks •Our mining operations are subject to operational risks that could adversely affect our business and our underground mining operations can be particularly dangerous. •Our management of waste rock and tailings are subject to significant environmental, safety and engineering challenges and risks that could adversely affect our business. •Violence, including shooting incidents, civil and religious strife, and activism could result in loss of life and/or disrupt our operations and may adversely affect our business. •Our business depends on good relations with our workforce and labor disputes or labor unrest could disrupt our operations from time to time, which could adversely affect our financial results. •Our mining operations depend on the availability of significant quantities of secure water supplies. •Development projects are inherently risky and may require more capital than anticipated, which could adversely affect our business. The development of our underground mines and operations are also subject to other unique risks. •We must continually replace reserves depleted by production but exploration is highly speculative and our exploration activities may not result in additional discoveries. •Estimates of proven and probable reserves and mineralized material are uncertain and the volume and grade of ore actually recovered may vary from our estimates. •Our operations are subject to extensive laws and regulations, some of which require permits and other approvals, which may increase our costs and may delay or result in a suspension of our operations. •Our business is dependent upon information technology systems, which may be adversely affected by disruptions, damage, failure and risks associated with implementation and integration. Environmental and social risks •Our operations are subject to environmental laws and regulations, and compliance with these laws and regulations involves significant costs and may constrain existing operations or expansion opportunities. •We incur significant costs for remediating environmental conditions on properties that have not been operated in many years. •Our Indonesia mining operations create difficult and costly environmental challenges, which could require us to incur increased costs. •Our operations require significant energy and regulation of greenhouse gas emissions may increase our costs and adversely affect our operations. •The physical impacts of climate change may adversely affect our copper mining operations. •Increasing scrutiny and evolving expectations from stakeholders with respect to our environmental, social and governance practices, performance and disclosures may impact our reputation and business and impose additional costs on us. •Failure or perceived failure to manage our relationships with the communities where we operate, including communities that are adjacent to or near our operations and Indigenous People, could harm our reputation and social license to operate. Other risks •Our holding company structure may impact our ability to service debt and our stockholders’ ability to receive dividends. •Anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult. Financial risks Fluctuations in the market prices of the commodities we produce, primarily copper, gold and molybdenum, have caused and may continue to cause significant volatility in our financial performance and in the trading prices of our common stock and debt. 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 vary with fluctuations in the market prices of the commodities we produce, primarily copper and gold, and to a lesser extent molybdenum. During 2020, the COVID-19 pandemic and resulting negative impact on the global economy created significant volatility in the financial markets, including the copper market. In 2020, copper prices ranged from a low of $2.09 per pound in March 2020 and a high of $3.61 per pound in December 2020, and with the ongoing COVID-19 pandemic, significant volatility may continue. Extended declines in market prices of our commodities, whether related to the ongoing COVID-19 pandemic or otherwise, could have a material adverse effect on our financial results and the value of our assets, may depress the price of our common stock, and may have a material adverse effect on our ability to comply with financial and other covenants in our debt agreements, repay our debt and meet our other obligations. Additionally, if market prices for our primary commodities decline and remain low for a sustained period of time, we may have to revise our operating plans, including curtailing or modifying some of our mining and processing operations. 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. For example, in early 2020, we announced revised operating plans in response to the global COVID-19 pandemic and resulting negative impact on the global economy, which resulted in reductions in (i) operating costs, (ii) capital expenditures, (iii) exploration and administrative costs, and (iv) sales volumes and production from those planned. Fluctuations in commodities prices are caused by varied and complex factors beyond our control, including global supply and demand and inventory levels; global economic and political conditions; international regulatory, trade and/or tax policies, including national tariffs; commodities investment activity and speculation; interest rates; expectations regarding future inflation rates; the strength of the U.S. dollar compared to foreign currencies; the price and availability of substitute products; and changes in technology. Volatility in global economic growth, particularly in developing economies, has the potential to adversely affect future demand and prices for commodities. Geopolitical uncertainty and protectionism, have the potential to inhibit international trade and negatively impact business confidence, which creates the risk of constraints on our ability to trade in certain markets and has the potential to increase price volatility. Copper prices may be affected by demand from China, which is currently the largest consumer of refined copper in the world, and by changes in demand for industrial, commercial and residential products containing copper. China had a major economic shutdown during first-quarter 2020 in connection with its efforts to contain and mitigate the spread of COVID-19, which resulted in the country’s first reported economic contraction in over 40 years. Although our sales during 2020 were not significantly affected, a slowing in China’s economic growth, another widespread COVID-19 outbreak in China or other pandemic, epidemic or endemic health issues, the adoption and expansion of trade restrictions, changes in China-U.S. relations, or other governmental action related to tariffs or trade agreements or policies are difficult to predict and could adversely affect copper prices, demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, results of operations, or financial condition. Copper prices have fluctuated historically, with London Metal Exchange (LME) copper settlement prices ranging from $2.09 per pound to $3.61 per pound during the three years ended December 31, 2020. LME copper settlement prices averaged $2.80 per pound in 2020, $2.72 per pound in 2019 and $2.96 per pound in 2018. The LME copper settlement price was $3.51 per pound on December 31, 2020, and $3.57 per pound on January 29, 2021. 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 Bullion Market Association (London) PM gold price averaged $1,770 per ounce in 2020, $1,393 per ounce in 2019 and $1,268 per ounce in 2018. The London PM gold price was $1,888 per ounce on December 30, 2020 (there was no London PM gold price quote on December 31, 2020), and $1,864 per ounce on January 29, 2021. The Metals Week Molybdenum Dealer Oxide weekly average price averaged $8.69 per pound in 2020, $11.37 per pound in 2019 and $11.93 per pound in 2018. The Metals Week Molybdenum Dealer Oxide weekly average price was $9.86 per pound on December 31, 2020, and $10.38 per pound on January 29, 2021. Declines in prices of commodities we sell could result in metals inventory adjustments and impairment charges for our long-lived assets. During 2020, we recorded unfavorable metals inventory adjustments totaling $96 million associated with lower market prices for copper and molybdenum. Refer to Note 4 for additional information regarding metals inventory adjustments. 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 current and future expected mine production costs. Our debt and other financial commitments may limit our financial and operating flexibility. At December 31, 2020, our total consolidated debt was $9.7 billion (see Note 8) and our total consolidated cash was $3.7 billion. We also have various other financial commitments, including reclamation and environmental obligations, take-or-pay contracts and leases. For further information, see risk factor below relating to mine closure and reclamation regulations, and plugging and abandonment obligations related to our remaining oil and gas properties. Although we have been successful in repaying debt in the past, refinancing our bank facilities, and issuing new debt securities in capital markets transactions, there can be no assurance that we can continue to do so. In addition, we may incur additional debt in future periods or reduce our holdings of cash and cash equivalents in connection with funding existing operations, capital expenditures, dividends, share repurchases or in pursuing other business opportunities. 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, industry and regulatory conditions; •Limiting our ability to fund future working capital, capital expenditures, general corporate requirements 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/or 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 may be accelerated upon an event of default. As of January 29, 2021, our senior unsecured debt was rated “BB“ with a positive outlook by Standard & Poor’s, “BB+” with a stable outlook by Fitch Ratings, and “Ba1” with a stable outlook by Moody’s Investors Service. If we are unable to maintain our indebtedness and financial ratios at levels acceptable to these credit rating agencies, or should our business prospects deteriorate, our current credit ratings could be downgraded, which could adversely affect the value of our outstanding securities and existing debt and our ability to obtain new financing on favorable terms and could increase our borrowing costs. The ongoing COVID-19 pandemic and any future pandemic, epidemic, endemic or similar public health threats and resulting negative impact on the global economy and financial markets may have an adverse impact on our business and results of operations, the duration and extent of which is highly uncertain and could be material. The ongoing COVID-19 pandemic continues to adversely impact the global economy and is creating significant volatility in the financial markets, including the copper markets. The duration and scope of and uncertainties associated with, the ongoing COVID-19 pandemic and the related impact on commodity prices, our business and the global economy are evolving and beyond our control. The extent and duration of adverse impacts that the COVID-19 pandemic may have on supply, demand and prices of the commodities we produce, on our suppliers, vendors, customers and employees and on global financial markets is unknown at this time, but could be both material and prolonged. Prolonged unfavorable economic conditions, and any resulting slowed global economic growth, including the current U.S. recession, may result in lower demand for the commodities we produce, as well as the inability of various customers, contractors, suppliers and other business partners to fulfill their obligations, which could have a material adverse effect on our business and results of operations. The COVID-19 pandemic disrupted our 2020 operating plans. In April 2020, we announced revised operating plans in response to the global COVID-19 pandemic and resulting negative impact on the global economy. Our revised operating plans focused on safeguarding our business in an uncertain public health and economic environment, advancing the ramp-up of underground production at Grasberg, and advancing initiatives in North America and South America. The ongoing COVID-19 pandemic or any future pandemic, epidemic, endemic or other similar public health threats could disrupt or change our future operating plans. For additional information, refer to Part 1, Item 2. herein. Our business and results of operations could be adversely affected if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions or other restrictions in connection with the COVID-19 pandemic. We have proactively implemented operating protocols at each of our operating sites to contain and mitigate the risk of spread of COVID-19, including but not limited to, physical distancing, travel restrictions, sanitizing, and frequent health screening and monitoring. COVID-19 cases have been confirmed through testing at our operating sites, including PT-FI’s remote operating site in Papua, Indonesia. Despite our efforts to manage these impacts, there can be no assurance that our actions will be effective in containing and mitigating the risk of spread or a major outbreak of COVID-19 at our operating sites. Additionally, although several vaccines for COVID-19 have been approved, there are risks that these vaccines will not be effective against variants of the virus and that these vaccines may not be accepted or widely available in the areas in which we operate due to shortages or other issues with distribution. A major outbreak of COVID-19 at any of our operating sites, and particularly at PT-FI’s remote operating site, could have a material adverse effect on our business and results of operations. Actions taken by governmental authorities and third parties to contain and mitigate the risk of spread of COVID-19 may have an adverse impact on our business. For example, in mid-March 2020, the Peru government issued a Supreme Decree and declaration of a National Emergency in its efforts to contain the outbreak of COVID-19, and subsequently extended the order through May 10, 2020. The Peru government also extended the quarantine measures instituted in mid-March 2020 through August 31, 2020, for certain cities in Peru (including Arequipa, where our Cerro Verde mine is located). To comply with the government’s requirements, we temporarily transitioned our Cerro Verde mine to care and maintenance status and adjusted operations to prioritize critical activities. Strict health protocols have been implemented and a plan for Cerro Verde to restore operations was approved by the Peru government in second-quarter 2020. Cerro Verde continued to increase milling rates while operating consistent with our April 2020 revised operating plans and under strict COVID-19 restrictions and protocols. Cerro Verde expects mill rates to average approximately 360,000 metric tons of ore per day in 2021 with the potential to ramp-up to pre-COVID-19 levels approximating 400,000 metric tons of ore per day as COVID-19 restrictions are lifted. These and other impacts of COVID-19 or other pandemic, epidemic, endemic or similar public health threats could also have the effect of heightening many of the other risks described in these “Risk Factors.” The ultimate impact of COVID-19 on our business is difficult to predict and depends on factors that are evolving and beyond our control, including the scope and duration of the outbreak and recovery, including any future resurgences, as well as actions taken by governmental authorities and third parties, including the distribution, effectiveness and acceptance of vaccines, to contain its spread and mitigate its public health effects. Any of these disruptions could continue to adversely impact our business and results of operations, and such adverse impacts could be material. 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 our business. 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. 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. 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. We are also subject to financial assurance requirements in connection with our remaining oil and gas properties and certain of our previously sold 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. As a result of a significant increase in the number of oil and gas companies experiencing financial distress, especially those operating in the Outer Continental Shelf, we may have additional exposure if our partners or buyers of our previously owned properties file for bankruptcy and/or default on their share of the abandonment obligations. 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 and in June 2017, BOEM further extended the start date for implementation indefinitely. On October 16, 2020, BOEM issued a Notice of Proposed Rulemaking and Request for Comments that proposed to limit the circumstances in which it will require supplemental bonding so that it will apply more narrowly than the 2016 requirements. However, we may still be subject to significant levels of supplemental bonding. 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, 2020, our financial assurance obligations totaled $1.5 billion for closure and reclamation/restoration costs of U.S. mining sites, and $0.5 billion for plugging and abandonment obligations of our remaining oil and gas properties. A substantial portion of our financial assurance obligations are satisfied by Freeport-McMoRan Inc. (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. The laws and regulations governing mine closure and remediation in a particular jurisdiction and oil and gas properties plugging and abandonment obligations are subject to review at any time and may be amended to impose additional requirements and conditions, which may cause our provisions for environmental and asset retirement obligations to be underestimated and could materially affect our financial position or results of operations. Similarly, our implementation of the Global Industry Standard for Tailings Management (the Tailings Standard) (discussed below) could require changes to our closure and reclamation plans, although it is uncertain if these changes would result in material capital or operating cost increases. In addition, climate change could lead to changes in the physical risks posed to our operations, which could result in changes in our closure and reclamation plans to address such risks. Any modifications to our closure and reclamation plans that may be required to address physical climate risks may materially increase the costs associated with implementing closure and reclamation at any or all of our active or inactive mine sites and the financial assurance obligations related to the same. 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, 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 contamination or from exposure to substances such as lead, arsenic, asbestos, talc, uranium 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. From time to time we are involved in disputes over the allocation of environmental remediation obligations at “superfund” and other sites. In addition, we may be held responsible for the costs of addressing contamination at the site of current or former activities or at third party sites, or be held liable to third parties for exposure to hazardous substances should those be identified in the future. 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. We may be adversely impacted by increased liabilities and costs related to our defined benefit pension plans. We sponsor defined benefit pension plans for certain current and former employees in the U.S. and a few pension plans for non-U.S. locations which provide for specified payments after retirement. The major defined benefit pension plans are funded with trust assets invested in a diversified portfolio of securities and other investments. Changes in regulatory requirements or the market value of plan assets, investment returns, interest rates and mortality rates affect the funded status of our defined benefit pension plans and may cause volatility in the net periodic benefit cost, future funding requirements of the plans and the funded status as recorded on the balance sheet. A sustained period of low or insufficient investment returns or low interest rates could require us to fund our pension plans to a greater extent than anticipated. Refer to Note 9 for further discussion. International risks Our international operations are subject to political, economic, social and regional 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. Risks of conducting business in countries outside the U.S. include: •Delays in obtaining or renewing, or the inability to obtain, maintain or renew, or the renegotiation, cancellation, revocation or forced modification of existing contracts, leases, licenses, permits or other agreements and/or approvals; •Expropriation or nationalization of property, protectionism, or restrictions on repatriation of earnings or capital; •Changes in the host country’s laws, regulations and policies (which may be applied retroactively), including, but not limited to, those relating to labor, taxation, royalties, duties, tariffs, divestment, imports, exports (including restrictions on the export of copper concentrates, copper and/or gold), trade regulations, immigration, currency and environmental matters (including land use and water use), which because of rising “resource nationalism” in countries around the world, may impose increasingly onerous requirements on foreign operations and investment, and/or result in fines, fees, and sanctions imposed for failure to comply with the laws and regulations of the jurisdictions in which we operate; •Political, social and economic instability, bribery, extortion, corruption, civil unrest, acts of war, guerrilla activities, insurrection and terrorism, certain of which may result in, among other things, an inability to access our property; •Risk of loss associated with trespass, local artisanal or illegal mining, theft and vandalism or due to potential pandemic, epidemic and endemic health issues; •Changes in U.S. trade, tariff, tax, immigration or other policies that may harm relations with foreign countries or result in retaliatory policies; •Increases in training and other costs and challenges relating to requirements by governmental entities to employ the nationals of the country in which a particular operation is located; •Foreign exchange controls, fluctuations in foreign currency exchange rates and inflation; •Reduced protection for intellectual property rights; 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. 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. We operate in jurisdictions that have experienced public and private sector corruption and where significant anti-corruption enforcement activities, prosecutions, and settlements have occurred. There can be no assurance that our internal control policies and procedures will always protect us from misinterpretation of or noncompliance with applicable laws and internal policies, recklessness, fraudulent behavior, dishonesty or other inappropriate acts committed by our affiliates, employees, agents or contractors. As such, our corporate policies and processes may not prevent or detect all potential breaches of law or other governance practices. Any violation of anti-corruption or anti-bribery 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 conduct international mining operations in Indonesia, Peru and Chile and exploration activities in various foreign jurisdictions. 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, social and regional uncertainties in each of these countries. For example, we are involved in several significant tax proceedings and other tax disputes with Indonesia and Peru 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 mining operations in Indonesia are a significant operating asset, our business may be adversely affected by political, economic and social uncertainties in Indonesia. Our Indonesia mining operations include the Grasberg minerals district, one of the world’s largest copper and gold deposits. These operations are conducted by our subsidiary PT-FI pursuant to a special mining license (IUPK) issued by the Indonesia government. Refer to Note 13 for a summary of the IUPK’s key fiscal terms. Maintaining a good working relationship with the Indonesia government is important 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. The Grasberg minerals district has been designated by the Indonesia government as one of Indonesia’s vital national assets. Partially because of its significance to Indonesia’s economy, the environmentally sensitive area where it is located, and the number of people employed, our Indonesia operations have been the subject of political debates and criticism in the Indonesia press, and have been the target of protests and occasional violence. Improper management of our working relationship with the Indonesia government could lead to a disruption of operations and/or impact our reputation in Indonesia and in the region where we operate, which could adversely affect our business. In addition, PT Indonesia Asahan Aluminium (Persero) (PT Inalum, also known as MIND ID), a shareholder in PT-FI, is an Indonesia state-owned enterprise. Disputes between us and PT Inalum may result in litigation or arbitration, which could increase our expenses and distract our officers and directors from focusing their time and effort on our business and could create tensions with the Indonesia government. The Indonesia mining industry is subject to extensive regulation within Indonesia, and there have been major developments in laws and regulations applicable to mining concession holders, some of which have conflicted with PT-FI’s contractual rights in the past. In particular, the enactment of Law No. 4 of 2009 on Coal and Mineral Mining on January 12, 2009 (the Mining Law) replaced the previous regulatory framework which allowed concession holders, including PT-FI, to conduct mining activities in Indonesia under a contract of work system. The Mining Law, which sets out the regulatory framework for the mining industry in Indonesia, only contains substantive principles and leaves many specific issues to be addressed in implementing regulations, some of which have conflicted with PT-FI’s contractual rights in the past, including, but not limited to, regulations that imposed a progressive export duty on copper concentrate, restricted exports of copper concentrate and anode slimes, increased royalty rates, and required payment of a smelter assurance bond to support a commitment to construct a new smelter in Indonesia (refer to Note 13 for further discussion of the smelter assurance bond). Notwithstanding provisions in PT-FI’s former Contract of Work (COW) prohibiting it from doing so, the Indonesia government sought to modify PT-FI’s former COW to address provisions contained in the Mining Law and implementing regulations adopted thereunder, some of which were not required under or conflicted with PT-FI’s former COW, including, but not limited to (i) restrictions on PT-FI’s basic right to export mining products; (ii) imposition of additional export duties and higher royalty rates; (iii) imposition of excess surface water taxes (refer to Note 12); (iv) imposition of new requirement to build additional smelter capacity in Indonesia; (v) unreasonable withholding and delay in granting approval of two successive ten-year extensions of the term of the former COW; and (vi) imposition of new divestment requirements. In early 2017, the Indonesia government issued new regulations to address exports of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. PT-FI’s export license for copper concentrate is valid for one year periods, subject to review and approval by the Indonesia government every six months, depending on smelter construction progress. PT-FI’s export license expires on March 15, 2021. Refer to MD&A and Note 12 for further discussion of the administrative fine levied by the Indonesia government on PT-FI for failing to achieve physical development progress on the new smelter, and ongoing discussions with the Indonesia government regarding a deferred schedule for the completion of the new smelter project as well as other alternatives in light of the ongoing COVID-19 pandemic and volatile global economic conditions. The 2017 regulations also permit the export of anode slimes, which is necessary for PT Smelting (PT-FI’s 25-percent-owned copper smelter and refinery located in Gresik, Indonesia) to continue operating. PT Smelting’s export license for anode slimes expires on July 18, 2021. In addition to a delay in the renewal of its export license for anode slimes in 2017, PT Smelting’s operations were shut down from mid-January 2017 until early March 2017 as a result of labor disturbances. Copper concentrate sales to PT Smelting totaled over 10 percent of our consolidated revenues for each of the years ended December 31, 2020, 2019 and 2018. We cannot predict when PT-FI’s copper concentrate license and PT Smelting’s anode slimes export license may be renewed. PT-FI’s sale of concentrates could be interrupted if either of these export license is not timely renewed or if PT Smelting is unable to operate either due to other operational or financial constraints, which would adversely impact our revenues and operations. We cannot assure you that future regulatory changes affecting the mining industry in Indonesia will not be introduced or unexpectedly repealed, or that new interpretations of existing laws and regulations will not be issued, which could adversely affect our business, financial condition and results of operations. We will not mine all of PT-FI’s ore reserves in the Grasberg minerals district before the initial term of PT-FI’s IUPK expires in 2031 and the IUPK may not be extended through 2041 if PT-FI fails to abide by the terms and conditions of the IUPK and applicable laws and regulations. On December 21, 2018, PT-FI was granted an IUPK to replace its former COW, enabling PT-FI to conduct operations in the Grasberg minerals district through 2041. Under the terms of the IUPK, PT-FI has been granted mining rights through 2031, with rights to extend its mining rights through 2041, subject to, among other things, PT-FI completing the construction of a new smelter in Indonesia by December 21, 2023 (an extension of which has been requested due to COVID-19 mitigation measures subject to the approval of the Indonesia government), and fulfilling its defined fiscal obligations to the Indonesia government. Refer to Note 13 for a summary of the IUPK’s key fiscal terms. The IUPK also requires PT-FI to pay duties on concentrate exports of 5 percent, declining to 2.5 percent when smelter development progress exceeds 30 percent, and eliminated when smelter development progress exceeds 50 percent. Refer to MD&A and Note 12 for further discussion of the administrative fine levied by the Indonesia government on PT-FI for failing to achieve physical development progress on the new smelter, and ongoing discussions with the Indonesia government regarding a deferred schedule for the completion of the new smelter project as well as other alternatives in light of the ongoing COVID-19 pandemic and volatile global economic conditions. Engineering and front-end engineering and design for the selected process technology are ongoing. The preliminary capital cost estimate for the project approximates $3 billion, and PT-FI plans to arrange financing for the project. The economics of the new smelter will be borne by PT-FI’s shareholders according to their respective share ownership percentages. PT-FI’s ability to raise and service significant new sources of capital will be a function of macroeconomic conditions, future market prices as well as PT-FI’s operational performance, cash flow and debt position, among other factors. Financing may not be available when needed or, if available, the terms of such financing may not be favorable to PT-FI. Our proven and probable ore reserves in Indonesia reflect estimates of minerals that can be recovered through the end of 2041, and PT-FI’s current long-term mine plan and planned operations are based on the assumption that PT-FI will abide by the terms and conditions of the IUPK and will be granted the 10-year extension from 2031 through 2041. As a result, we will not mine all of these ore reserves during the initial term of the IUPK. Prior to the end of 2031, we expect to mine 50 percent of aggregate proven and probable recoverable ore at December 31, 2020, representing 57 percent of our net equity share of recoverable copper reserves and 59 percent of our net equity share of recoverable gold reserves. If PT-FI does not complete the construction of a new smelter in Indonesia by December 21, 2023 (an extension of which has been requested due to COVID-19 mitigation measures subject to the approval of the Indonesia government), or fulfill its defined fiscal obligations to the Indonesia government as set forth in the IUPK, the IUPK will likely not be extended from 2031 to 2041, and we would be unable to mine all of PT-FI’s ore reserves in the Grasberg minerals district, which would adversely affect our business, results of operations and financial position. Operational risks Our mining operations are subject to operational risks that could adversely affect our business and our underground mining operations can be particularly dangerous. 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; environmental hazards, including discharge of metals, concentrates, pollutants or hazardous chemicals; surface or underground fires; equipment failures; accidents, including in connection with mining equipment, milling equipment or conveyor systems, transportation of chemicals, explosives or other materials and in the transportation of employees and business partners to and from sites; wall failures and rock slides in our open-pit mines, and structural collapses of our underground mines or tailings impoundments; lower than expected ore grades or recovery rates; and unexpected geological formations or conditions (whether in mineral or gaseous form). For a discussion of risks specific to our tailings management, see below “Our management of waste rock and tailings are subject to significant environmental, safety and engineering challenges and risks that could adversely affect our business.” We are facing continued geotechnical challenges due to the older age of some of our open-pit mines and a trend toward mining deeper pits and more complex deposits. No assurances can be given that unanticipated geotechnical and hydrological conditions may or may not occur, nor whether these conditions may lead to events such as landslides and pit wall failures, in the future or that such events will be detected in advance. Geotechnical instabilities can be difficult to predict and are often affected by risks and hazards outside of our control, such as seismic activity or severe weather, which may lead to floods, mudslides, pit-wall instability, and possibly even slippage of material. During the first quarter of 2019, our El Abra operation in Chile experienced heavy rainfall and electrical storms. As a result, our operating results for 2019 were impacted by a suspension of El Abra’s crushed leach stacking operations for approximately 35 days. We cannot predict whether similar events will occur in the future or the extent to which any such event would affect this, or any of our other operations. 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 ceiling of an underground 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 in June 2013, and underground operations in July 2013. No assurance can be given that similar events will not occur in the future. In addition to the usual risks encountered in the mining industry, our Indonesia mining operations involve additional risks given their location 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. The area also receives extreme rainfall, which has led to periodic floods and mudslides. Further, the mine site is also in an active seismic area and has experienced earth tremors from time to time. We maintain insurance at amounts we believe to be reasonable to cover some of these risks and hazards; however, our insurance may not sufficiently cover losses from certain natural or operating disasters. No assurance can be given that such insurance will continue to be available, or that it will be available at economically feasible premiums, or that we will be able to obtain or maintain such insurance. We may elect to not purchase insurance for certain risks due to the high premium costs associated with insuring such risk or for various other reasons. We do not have coverage for certain environmental losses and other risks, as such coverage generally cannot be purchased at a commercially reasonable cost by us or other companies within the mining industry. The lack of, or insufficiency of, insurance coverage could adversely affect our cash flow and overall profitability. The occurrence of one or more of these events in connection with our exploration activities and development of and production from mining operations may result in the death of, or personal injury to, our employees, other personnel or third parties, the loss of mining equipment, damage to or destruction of mineral properties or production facilities, significant repair costs, monetary losses, deferral or unanticipated fluctuations in production, extensive community disruption, loss of licenses, permits or necessary approvals to operate, loss of infrastructure and services, disruption to essential supplies or delivery of our products, environmental damage and potential legal liabilities, all of which may adversely affect our reputation, business, prospects, results of operations and financial position. Our management of waste rock and tailings are subject to significant environmental, safety and engineering challenges and risks that could adversely affect our business. 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 primarily relating to structural stability, geochemistry, water quality and dust generation. Management of this waste is regulated in the jurisdictions where we operate and our programs are designed to comply with applicable national, state and local laws, permits and approved environmental impact studies. We maintain large leach pads and tailings impoundments containing viscous material. Tailings impoundments include large embankments that must be engineered, constructed and monitored to ensure 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 discussed in more detail below under Environmental and social risks - “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.” Affiliates of our company currently operate 17 tailings storage facilities, 15 in the U.S. and 2 in Peru; and manage 56 tailings storage facilities in the U.S. that are inactive or closed (approximately three-fourths of the inactive facilities have been closed). Our inventory of tailings storage facilities comprises 12 active and 51 inactive or closed facilities with an upstream design and 5 active and 5 inactive with a centerline design. In 2020, we produced approximately 259 million metric tons of tailings. The failure of tailings and other embankments at any of our mining operations could cause severe, and in some cases catastrophic, property and environmental damage and loss of life, as well as adverse effects on our business and reputation. Many of our tailings storage facilities are located in areas where a failure has the potential to impact individual dwellings and a limited number of impoundments are in areas where a failure has the potential to impact nearby communities or mining infrastructure. As a result, our programs take into account the significant consequences resulting from a potential failure, and we apply substantial financial resources and internal and external technical resources to pursue the safe management of all those facilities. Our tailings management and stewardship program, which involves qualified external Engineers of Record and periodic oversight by independent tailings Technical Review Boards and our Tailings Stewardship Team, complies with the tailings governance framework on preventing catastrophic failure of tailings storage facilities adopted in December 2016 by the International Council on Mining and Metals (ICMM), an industry group of which we are a founding member, and required to be implemented by ICMM members. We continue to enhance our existing practices and work with ICMM on additional initiatives to strengthen the design, operation and closure of tailings storage facilities in an effort to reduce the risk of severe or catastrophic failure of those facilities. However, no assurance can be given that these events will not occur in the future. The importance of careful design, management and monitoring of large impoundments has been emphasized in recent years by large scale tailings dam failures at unaffiliated mines, which resulted in numerous fatalities and caused extensive property and environmental damage. As a result of failures at unaffiliated mines, in 2019, international groups initiated the drafting of standards for the safe management of tailings facilities. In August 2020, the co-conveners of the Global Tailings Review, which included ICMM, published the Tailings Standard. The Tailings Standard includes 77 requirements across 6 key areas including the design, construction, operation and monitoring of tailings facilities, management and governance, emergency response and long-term recovery, and public disclosure. ICMM has committed that members will implement the Tailings Standard within three years for certain facilities and within five years for all others. ICMM members have prepared a guidance document focused on practices that drive safe tailings management and prepared a conformance protocol document to be used by companies on demonstrating implementation of the Tailings Standard; both documents are expected to be published in early 2021. As an ICMM member, management has committed to implement the Tailings Standard at our tailings storage facilities, including providing required public disclosures regarding our facilities and efforts. We are evaluating changes to our tailings stewardship and management programs and approaches that may be needed to demonstrate conformance with the Tailings Standard, although it is uncertain if changes would result in material capital or operating cost increases. In addition, changes in physical risks to our facilities resulting from climate change could lead to changes in our plans for managing tailings and waste rock in order to address such risks, which may materially increase the costs associated with managing waste rock and tailings at any or all of our active or inactive mine sites. Addressing the effects of climate change on tailings facilities is a requirement under the Tailings Standard. Based on observations from such tailings failures at unaffiliated mines, in addition to fatalities and severe personal, property and environmental damages, these events could result in limited or restricted access to mine sites, suspension of operations, decrease in reserves, legal liability (possibly involving the freezing of assets), government investigations, additional regulations and restrictions on mining operations in response to any such failure, increased monitoring costs and production costs, increased insurance costs or inability to obtain insurance, increased costs and/or limited access to capital, remediation costs, inability to comply with any additional safety requirements or obtain necessary certifications, evacuation or relocation of communities or other emergency action, and other impacts, which could have a material adverse effect on our operations and financial position. Violence, including shooting incidents, civil and religious strife, and activism could result in loss of life and/or disrupt our operations and may adversely affect our business, financial condition, results of operations and prospects. 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 Indonesia 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 2020. During this time, there were 22 fatalities and more than 75 injuries to our employees, contractor employees, government security personnel and civilians. In addition, in December 2018, a mass shooting incident targeting a highway construction crew occurred in a remote mountain area approximately 100 miles east of the PT-FI project area, resulting in at least 19 fatalities and several reported as missing. During first-quarter 2020 and April 2020, there was an escalation in shooting incidents in PT-FI’s area of operations. In late March 2020, a shooting incident occurred near PT-FI’s administrative offices in the lowlands in Papua, Indonesia, resulting in the death of one PT-FI employee and injuries to two other workers. In January 2021, another shooting incident occurred when a helicopter operating under contract to PT-FI was struck by a single gunshot. Separatist security incidents, including shootings, continue to be sporadically reported, and PT-FI continues to monitor the occurrence of incidents in the region. The safety of our workforce is a critical concern, and PT-FI continues to work with the Indonesia government to enhance security and address security issues within the PT-FI project area and in nearby areas. We 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 result in loss of life, disrupt or suspend our 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. South America countries have historically experienced uneven periods of economic growth, as well as recession, periods of high inflation and general economic and political instability. During 2019 and 2020, both Peru and Chile experienced significant and prolonged civil unrest unrelated to our operations. Production and sales for the third quarter and first nine months of 2019 were impacted by protests associated with an unaffiliated copper development project in Peru that blocked access to the shipping ports and main transportation routes. Although the civil unrest did not significantly impact our results for 2019, similar events in the future could cause, our South America operations to be materially impacted, in which case, we may not be able to meet our production and sales targets. We cannot predict whether similar or more significant incidents of civil unrest will occur in the future in Peru or Chile. Our business depends on good relations with our workforce and labor disputes or labor unrest could disrupt our operations from time to time, which could adversely affect our financial results. Our business is dependent, in part, on maintaining good relations with our workforce. A significant portion of our employees are represented by labor unions in a number of countries under various collective bargaining agreements with varying durations and expiration dates. Refer to Items 1. and 2. “Business and Properties” of this annual report on Form 10-K for additional information regarding labor matters, and expiration dates of such agreements. As of December 31, 2020, approximately 38 percent of our global labor force was covered by collective bargaining agreements and approximately 16 percent of our global labor force was covered by agreements that have expired and are currently being negotiated or will expire during 2021. 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. We could 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, which continued during fourth-quarter 2016 and into the first half of 2017. Beginning in mid-April 2017, PT-FI experienced a high level of worker absenteeism, which unfavorably impacted mining and milling rates, and in May 2017, a significant number of employees and contractors elected to participate in an illegal strike action. These employees were subsequently deemed to have voluntarily resigned under existing Indonesia laws and regulations resulting in increased costs associated with employee severance. In third-quarter 2020, we experienced a five-day labor-related work stoppage related to COVID-19 travel restrictions when a small group of workers at PT-FI staged protests and a blockade restricting access to the main road to the mining operations area. We reached an amicable resolution with the group of workers while upholding our COVID-19 safety protocols. There were no strikes or lockouts at any of our operations in 2020. We cannot predict whether additional labor disruptions will occur. Significant reductions in productivity or protracted work stoppages at one or more of our operations could significantly reduce our production and sales volumes or disrupt operations, which could adversely affect our cash flow, results of operations and financial condition. Our mining operations depend on the availability of significant quantities 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, and where climate change may lead to increasing scarcity of water resources in the future. 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. As discussed in Item 3. “Legal Proceedings,” in Arizona, where our operations use both surface water and groundwater, we are a participant in an active adjudication in which Arizona courts have been attempting, for over 45 years, to quantify and prioritize surface water claims for the Gila River watershed, one of the state’s largest river systems. This adjudication 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 than surface water under Arizona law, which historically allowed land owners to pump subsurface water, subject only to the requirement of putting it to “reasonable use.” However, court decisions in the adjudication have concluded that some, as yet undetermined, volume of subsurface underground water constitutes “subflow” that is to be treated legally as surface water (rather than groundwater) and is therefore subject to the Arizona doctrine of prior appropriation (first in time, first in right) and subject to the adjudication and potentially unavailable to groundwater pumpers, including us, in the absence of valid surface water claims. A 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 proceedings. Given the legal and technical complexity of these adjudications, their long history, and their long-term legal, economic and political implications, it is difficult to predict the timing or the outcome of these proceedings. If we are not able to satisfactorily resolve the issues being addressed in the adjudications, our ability to pump groundwater could be diminished or curtailed, and our operations at Morenci, Safford and Sierrita could be adversely affected unless we are able to acquire alternative resources. 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 and from wastewater collected from the city of Arequipa and treated at a wastewater treatment plant. As a result of occasional drought conditions, temporary supply shortages that could affect our Cerro Verde operations are possible. 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. Our current permit will expire in 2029 unless we are able to renew it again. 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 Indonesia operations, the area receives considerable rainfall that makes us susceptible to periodic floods and mudslides, the nature and magnitude of which cannot be predicted. 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. Development projects are inherently risky and may require more capital than anticipated, which could adversely affect our business. The development of our underground mines and operations are also subject to other unique risks. Mine development projects typically require a number of years and significant expenditures during the development phase before production is possible. Currently, our major projects include underground development activities in the Grasberg minerals district, which currently constitutes approximately 29 percent of our estimated consolidated recoverable proven and probable copper reserves. There are many risks and uncertainties inherent in all development projects including, but not limited to, unexpected or difficult geological formations or conditions, potential delays, cost overruns, lower levels of production during ramp-up periods, shortages of material or labor, construction defects, breakdowns and injuries to persons and property. The development of our underground mines and operations are also subject to other unique risks including, but not limited to, underground fires or floods, ventilating harmful gases, fall-of-ground accidents, and seismic activity resulting from unexpected or difficult geological formations or conditions. While we anticipate taking all measures that we deem reasonable and prudent in connection with the development of our underground mines to safely manage production, there is no assurance that these risks will not cause schedule delays, revised mine plans, injuries to persons and property, or increased capital costs, any of which may have a material adverse impact on our cash flows, results of operations and financial condition. Additionally, although we devote significant time and resources to our project planning, approval and review processes, many of our development projects are highly complex and rely on factors that are outside of our control, which may cause us to underestimate the time and capital required to complete a development project. For example, we experience mining induced seismic activity from time to time at the Deep Mill Level Zone (DMLZ) underground mine in the Grasberg minerals district. Results to date of hydraulic fracturing activities to manage rock stresses and pre-condition the DMLZ underground mine for large-scale production have been effective. However, we cannot predict whether additional occurrences of seismic activity or other unexpected geological activity will occur that could cause schedule delays or additional revisions to PT-FI’s mine plans, which could adversely affect our cash flows, results of operations and financial condition. We must continually replace reserves depleted by production but exploration is highly speculative and 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. Depleted reserves can be replaced in several ways, including expanding known ore bodies, reducing operating costs that could extend the life of a mine by allowing us to cost-effectively process ore types that were previously considered uneconomic, by locating new deposits or acquiring interests in reserves from third parties. Exploration is highly speculative in nature, involves many risks and uncertainties, requires substantial capital expenditures, and is frequently unsuccessful in discovering significant mineralization. Accordingly, our current or future exploration programs may not result in the discovery of additional deposits that can be produced profitably. Even if significant mineralization is discovered, it will likely take many years from the initial phases of exploration until commencement of production, during which time the economic feasibility of production may change. 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. Estimates of proven and probable reserves and mineralized material are uncertain and the volume and grade of ore actually recovered may vary from our estimates. Our estimates of recoverable proven and probable mineral reserves have been prepared in accordance with Industry Guide 7 as required by the Securities Exchange Act of 1934. There are numerous uncertainties inherent in mineral reserves estimates. Such estimates are, to a large extent, based on assumed long-term prices for the commodities we produce, primarily copper, gold and molybdenum, and interpretations of geologic data obtained from drill holes and other exploration techniques, which data may not necessarily be indicative of future results. Our mineral reserve estimates are based on the latest available geological and geotechnical studies. We conduct ongoing studies of our ore bodies to optimize economic values and to manage risk. We revise our mine plans and estimates of recoverable proven and probable mineral reserves as required in accordance with the latest available studies. Geological assumptions about our mineralization that are valid at the time of estimation may change significantly when new information becomes available. Estimates of recoverable proven and probable mineral reserves, or the cost at which we anticipate such mineral reserves will be recovered, are based on uncertain assumptions. The uncertain global financial outlook may affect economic assumptions related to reserve recovery and may require reserve revisions. Changes to such estimates could affect our asset carrying values and may also negatively impact our future financial condition and results. In addition, if the market prices for the commodities we produce decline from recent levels, if production costs increase or recovery rates decrease, or if applicable laws and regulations are adversely changed, we can offer no assurance that the indicated level of recovery will be realized or that mineral reserves can be mined or processed profitably. If we determine that certain of our estimated recoverable proven and probable mineral reserves have become uneconomic, this may ultimately lead to a reduction in our aggregate reported mineral reserves which could have a material adverse effect on our business, financial condition and results of operations. Additionally, the term “mineralized material” does not indicate recoverable proven and probable mineral reserves as defined by the U.S. Securities and Exchange Commission (SEC). Estimates of mineralized material are subject to further exploration and potential development, and, therefore, are subject to considerable uncertainty. Mineralized material is a mineralized body that has been delineated by appropriately spaced drilling and/or underground sampling to support the reported tonnage and average metal grades. Such a deposit cannot qualify as recoverable proven and probable mineral reserves until legal and economic feasibility are confirmed based upon a comprehensive evaluation of development costs, unit costs, grades, recoveries and other material factors. Accordingly, no assurance can be given that the estimated mineralized material not included in reserves will become recoverable proven and probable mineral reserves. In 2018, the SEC adopted amendments to the disclosure requirements for mining registrants. We will be required to comply with the new rules beginning with our annual report on Form 10-K for fiscal year 2021. Future adjustment to estimates of mineral reserves or mineralized material may occur as a result of the differing standards under the new requirements including, but not limited to, the replacement of our estimate of mineralized material with an estimate of “mineral resources.” Our operations are subject to extensive laws and regulations, some of which require permits and other approvals. Compliance with these regulations increases our costs and, in the event of an alleged violation, may delay or result in a suspension of 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 mining company, compliance with environmental legal requirements is an integral and costly part of our business. For additional information, see “Environmental and social 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 (Mine Act). MSHA inspects our mines on a regular basis and issues citations and orders when it believes a violation has occurred under the Mine Act. Additionally, in the U.S. various state agencies have concurrent jurisdiction arising under state law that regulate worker health and safety in both our industrial facilities and mines. If regulatory inspections result in an alleged violation, we may be subject to fines and penalties and, in instances of alleged significant violations, our mining operations or industrial facilities could be subject to temporary or extended closures. Refer to Exhibit 95.1 to this annual report on Form 10-K for additional information regarding certain orders and citations issued by MSHA for our operations during the year ended December 31, 2020. 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, including executive orders, or changes to or new interpretations of existing laws and regulations by courts or regulatory authorities occur regularly, but are difficult to predict. Changes under a new president, administration and Congress in the U.S. are also difficult to predict. Any such variations could negatively impact the mining sector, including our business, substantially increase costs to achieve compliance or otherwise could have a material adverse effect on our cash flow, results of operations and financial condition. Our business is dependent upon information technology systems, which may be adversely affected by disruptions, damage, failure and risks associated with implementation and integration. Our industry has become increasingly dependent on digital technologies. Our strategy of operating large, long-lived, geographically diverse assets has been increasingly dependent on our ability to become fully integrated and highly automated. Many of our business and operational processes are heavily dependent on traditional and emerging technology systems to conduct day-to-day operations, improve safety and efficiency, and lower costs. As our dependence on information systems, including those of our third party service providers and vendors, grows, we become more vulnerable to an increasing threat of continually evolving cybersecurity risks. In recent years, cybersecurity incidents have increased in frequency and magnitude. These incidents may include, but are not limited to, installation of malicious software, phishing, credential attacks, unauthorized access to data and other advanced and sophisticated cybersecurity breaches and threats, including threats that increasingly target critical operational technologies and process control networks. If any of these threats materialize, we could be subject to manipulation or improper use of our systems and networks, production downtimes, communication interruption or other disruptions and delays to our operations or to the transportation of products or infrastructure utilized by our operations, unauthorized release of proprietary, commercially sensitive, confidential or otherwise protected information, the corruption of data, significant health and safety consequences, environmental damage, loss of intellectual property, fines and litigation, damage to our reputation 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. We have experienced targeted and non-targeted cybersecurity incidents in the past and may experience them in the future. While these cybersecurity incidents did not result in any material loss to us or interrupt our day-to-day operations, there can be no assurance that we will not experience any such losses in the future. Given the unpredictability of the timing and the evolving nature and scope of information technology disruptions, the various procedures and controls we use to monitor and protect against these threats and to mitigate our potential risks to such threats may not be sufficient in preventing cybersecurity incidents from materializing. Further, as cybersecurity threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate vulnerabilities to cybersecurity threats. We could also be adversely affected by system or network disruptions if new or upgraded information technology systems are defective, not installed properly or not properly integrated into our operations. Various measures have been implemented to manage our risks related to system implementation and modification, but system modification failures could have a material adverse effect on our business, financial position and results of operations and could, if not successfully implemented, adversely impact the effectiveness of our internal controls over financial reporting. Environmental and social 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 and complex 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 a significant portion of the copper concentrate produced by our North America copper mines. EPA regulations required us to invest approximately $230 million in 2017 for new pollution control equipment to reduce sulfur dioxide (SO2) to meet both regional haze requirements and to allow the Arizona Department of Environmental Quality (ADEQ) to demonstrate compliance with EPA’s SO2 ambient air quality standards. In addition, EPA is currently in the process of revising the standards for hazardous air pollutants from primary copper smelters, which could impose additional requirements on our operations. We cannot guarantee that we will not be required to modify our systems or install additional equipment to address findings, new requirements or for other reasons, which could result in significant costs, including increased capital expenditures and operating costs, and could adversely impact our business. 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 previously sent materials for processing, recycling or disposal. As discussed in more detail in the below risk factor - “We incur significant costs for remediating environmental conditions on properties that have not been operated in many years,” we have substantial obligations for environmental remediation on mining properties previously owned or operated by Freeport Minerals Corporation (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, and 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 Risks above. For example, criteria for man-made organic compounds that could be present in soil, groundwater and surface water at our existing and former operations are currently under review by federal and state agencies, including drinking water regulation of Perfluorooctanesulfonic and Perfluorooctanoic acids proposed by EPA in February 2020 and a provisional National Pollutant Discharge Elimination strategy for permitting Per- and Polyfluoroalkyl substances proposed by EPA in November 2020. In 2015, EPA and the Department of the Army (collectively, the Agencies) adopted rules that added 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 were challenged by multiple states and industry parties and litigation is ongoing. On October 22, 2019, the Agencies published a final rule that repeals these 2015 rules and recodifies the regulations in place prior to adoption of the 2015 rules. EPA also published a proposed rule on February 14, 2019, which revises the definition of “waters of the United States” to clarify the scope of waters federally regulated under the Clean Water Act. The final rule became effective on June 22, 2020, and is currently subject to multiple legal challenges. In connection with the Presidential Executive Order issued on January 20, 2021 (the Executive Order), this final rule will be reviewed again by the Agencies. These rules define whether we need federal authorization under the Clean Water Act to expand our operations. Regulations have been considered at various governmental levels to increase financial responsibility requirements both for mine closure and reclamation and for oil and gas decommissioning. In 2019, legislation was enacted in Colorado that eliminates our ability to use parent company guarantees, and requires proof of an end date for water treatment as a condition of permit issuance authorizing mining operations, with some exceptions for existing operations. Adoption of similar environmental regulations or more stringent application of existing regulations may materially increase our costs, threaten certain operating activities and constrain our expansion opportunities. In 2018, EPA concluded a rulemaking that considered the need for financial responsibility for hardrock mining operations under CERCLA by publishing its determination that it did not intend to require financial responsibility for the hardrock mining industry sector. In connection with the Executive Order, EPA will review this final action. Our mining operations are subject to regulations under the Endangered Species Act (ESA) that are intended to protect species listed by the Department of Interior’s Fish & Wildlife Service (FWS) as endangered or threatened, along with critical habitat designated by FWS for these listed species. The regulations 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. On August 27, 2019, FWS published final rules that mitigate, but do not eliminate, potential regulatory constraints on mining operations under the ESA and on December 16, 2020, FWS published revisions to its definition of critical habitat. On December 18, 2020, FWS published a final rule governing exclusion of areas from critical habitat based on a discretionary exclusion analysis. In connection with the Executive Order, these rules will be reviewed again by FWS. FWS is also reconsidering the listing of certain species and designation of critical habitat for several listed species. No assurances can be made that restrictions relating to conservation will not have an adverse impact on expansion of our operations or not result in delays in project development, constraints on exploration and constraints on operations in impacted areas. 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 $0.3 billion in 2020 and $0.4 billion in both 2019 and 2018. For 2021, we expect to incur approximately $0.4 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, 2020, we had more than 100 active remediation projects in 24 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, 2020, we had $1.6 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. EPA is considering how to reduce lead exposure in the environment under multiple environmental programs. Certain federal and state health agencies also support lower lead cleanup levels. The timing for these EPA activities is unclear, but reduction in lead cleanup levels could result in material increases to our environmental reserves for ongoing residential property cleanup projects near former smelter sites. 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. In 2020, PT-FI produced approximately 30 million metric tons of tailings. Our tailings management plan, which has been approved by the Indonesia 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, certain 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. Certain of the Grasberg overburden stockpiles have experienced significant erosion over time, exacerbated in 2011 by unanticipated work stoppages that adversely affected our ability to properly manage these overburden stockpiles. This overburden affects the volume as well as the physical and chemical characteristics of the sediment material deposited in the lowlands tailings management area, resulting in increased environmental impacts. PT-FI’s current tailings deposition management plan as well as environmental monitoring programs take into account the presence of this overburden in the lowlands tailings management area. As part of its management and monitoring program, PT-FI expanded the scope of its studies and analysis to assess the environmental and potential human health impacts resulting from the overburden erosion, including conducting and updating risk assessments to determine what additional monitoring and mitigation efforts such impacts may require in the future, which will result in increased costs that could be significant. In the past, certain Indonesia 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. We cannot guarantee that we will not have overtopping or levee failure caused by extreme weather events or unanticipated structural failure in the future, which could result in flooding of the nearby communities. If flooding were to occur, it could result in loss of lives, and severe personal, property and environmental damages, which could necessitate evacuation or relocation of communities or other emergency action, financial assistance to the communities impacted, and remediation costs to repair and compensate for the social, cultural and economic impacts. In December 2018, Indonesia’s Ministry of Environment and Forestry (MOEF) issued a revised environmental permit to PT-FI to address many of the operational activities that it alleged were inconsistent with earlier studies. PT-FI and the MOEF also established a new framework for continuous improvement in environmental practices in PT-FI’s operations, including initiatives that PT-FI will pursue to increase tailings retention and to evaluate large scale beneficial uses of tailings within Indonesia. In addition, PT-FI continues to work with MOEF to finalize environmental permitting related to the rail facilities and certain of the underground mining production operations as well as permitting for the extension of levees to contain the lateral flow of tailings in the lowlands. Refer to Note 12 for further discussion. We cannot assure you that future environmental changes affecting the mining industry in Indonesia will not be introduced or unexpectedly altered or repealed, or that new interpretations of existing environmental laws and regulations will not be issued, which might have a significant impact on PT-FI. Our operations require significant energy and regulation of greenhouse gas (GHG) emissions may increase our costs and adversely affect our operations. Our operations require significant energy, much of which is from fossil fuel sources, and is obtained from third parties under long-term contracts. Energy represented approximately 16 percent of our copper mine site operating costs in 2020, and is expected to approximate 18 percent in 2021. The principal sources of energy consumption at our mining operations are: diesel fuel, which powers mine trucks and other transportation equipment; purchased electricity, which powers core facilities and certain on-site metal processing operations; and coal and natural gas, which provides electricity at certain operations. In certain aspects of our operations, our ability to reduce our GHG emissions is directly dependent on the actions of third parties, and our ability to make significant, rapid changes in our GHG emissions in response to potential future regulations may be limited. For example, GHG emissions from our diesel-fueled mine trucks make up the majority of our Scope 1 GHG emissions at our North America and South America operations, but reduction of emissions from mine trucks will depend upon the development of alternative-fueled mining equipment by our third-party suppliers. In addition, while we strive to purchase renewable power for our mining operations, as a commercial consumer of power, our ability to reduce our Scope 2 GHG emissions associated with our power demand is dependent upon the mix of our suppliers and locally-available renewable energy resources. As a result, we could face additional costs associated with any new regulation of GHG emissions, and our ability to modify our operations to avoid these costs may be limited in the near term. 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 GHG emissions. Under the new presidential administration, the U.S. re-joined the Paris Agreement in January 2021, which may result in a renewed focus on policies to reduce GHG emissions at the federal level. In the U.S., several states, including Colorado and New Mexico, have advanced goals reducing or eliminating fossil-fuel based energy production. Transitions to renewable and other energy sources could, among other things, increase our operating and energy costs depending on the scope, magnitude, and timing of increased regulation of fossil-fuel based energy production, including GHG emissions. The physical impacts of climate change may adversely affect our copper mining operations. The potential physical impacts of climate change on our operations are highly uncertain, and would vary by operation based on particular geographic circumstances. At many of our copper mine sites, climate change is projected to impact local precipitation regimes, resulting in shorter-duration, higher-intensity storm events, and the potential for less precipitation overall. We could face increased operational costs associated with managing additional volumes of storm water during more intense future events. In addition, the potential for overall decreases in precipitation could affect the availability of water needed for our operations, leading to increased operating costs, or in extreme cases disruptions to mining operations. As part of our commitment to implementing the Tailings Standard, we will be required to consider uncertainties due to climate change, incorporate that assessment into the relevant knowledge base for our tailings facilities, use this knowledge base to enhance the resilience of our approach to the impacts of climate change using an adaptive management approach, incorporate that knowledge into facility operations, and take measures to mitigate both environmental impact and potential failure risks at our tailings facilities, including those arising from climate change. To the extent these obligations require future changes at our tailings facilities, it could increase our operational expenses or require further capital investments. Increasing scrutiny and evolving expectations from stakeholders with respect to our ESG practices, performance and disclosures may impact our reputation and business and impose additional costs on us. There is increased scrutiny from stakeholders related to our ESG practices, performance and disclosures, including prioritization of sustainable and responsible production practices, decarbonization and reduction of our carbon footprint, tailings stewardship and social license to operate among others in the jurisdictions where we operate. We have adopted certain policies and programs as highlighted in our Annual Report on Sustainability, including with respect to responsible production frameworks, climate change, water stewardship, biodiversity, tailings management and stewardship, waste management, safety and health, human capital management, human rights, social performance and community and Indigenous People relations, and responsible sourcing. It is possible, however, that our stakeholders might not be satisfied with our ESG practices, performance and/or disclosures, or the speed of their adoption, implementation and measurable success. If we do not meet our evolving stakeholders’ expectations, our reputation, our access to and cost of capital, and our stock price could be negatively impacted. In addition, our customers and end users may require that we implement certain additional ESG procedures or standards before they will start or continue to do business with us, which could lead to preferential buying based on our ESG practices compared to our competitors’ ESG practices. Investor advocacy groups, certain institutional investors, investment funds, creditors and other influential investors are increasingly focused on our ESG practices and in recent years have placed increasing importance on the implications of their investments. Organizations that provide information to investors on ESG performance and related matters have developed quantitative and qualitative data collection processes and ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions. Unfavorable ratings or assessment of our ESG practices may lead to negative investor sentiment toward us, which could have a negative impact on our stock price and our access to and cost of capital. Additionally, if we do not adapt to or comply with investor or stakeholder expectations and standards, which are evolving, or if we are perceived to have not responded appropriately, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and our business, financial condition, and/or stock price could be materially and adversely affected. Failure or perceived failure to manage our relationships with the communities where we operate, including communities that are adjacent to or near our operations and Indigenous People, could harm our reputation and social license to operate. Our relationships with the communities where we operate, including communities that are adjacent to or near our operations and Indigenous People, are critical to the long-term success of our existing operations and the development of any future projects. There is an ongoing and potentially increasing public concern relating to social license to operate and the perceived effect of mining activities on the environment and on communities impacted by such activities. We may engage in activities, such as exploration, production, construction or expansion of our operations that have or are perceived to have adverse impacts on the local communities and their relevant stakeholders, society as a whole, Indigenous Peoples, cultural heritage, human rights and the environment. For example, our operations may take place on or adjacent to Indigenous Peoples’ territories. We may be required or expected by our stakeholders to consult with and/or obtain consent from Indigenous Peoples with respect to these operations. In addition, our assets are generally long-lived and perceptions and expectations from stakeholders can change over the life of the mine. Changes in the aspirations and expectations of local communities where we operate, including Indigenous Peoples, with respect to our contributions to employee health and safety, infrastructure, community development, environmental management and other factors could affect our social license to operate and reputation and lead to increased costs and reduced future earnings if expansions or new projects are blocked either temporarily or for extended periods. Failure to effectively engage with communities on an ongoing basis, including the withdrawal of consent or support of Indigenous Peoples, or other stakeholders, could adversely impact our business, damage our reputation and/or result in loss of rights to explore, operate or develop our projects. 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 establish information requirements and timing restrictions for meeting requests; •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; and •Provide to the fullest extent permitted by law that unless FCX consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, jurisdiction, the United States District Court for the District of Delaware) will be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of FCX, (ii) action asserting a claim that is based upon a violation of a duty by a current or former director, officer, employee or stockholder of FCX in such capacity, (iii) action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or to which the Delaware General Corporation Law confers jurisdiction upon the Court of Chancery of the State of Delaware, (iv) action asserting a claim governed by the internal affairs doctrine, or (v) action asserting an “internal corporate claim” as that term is defined in Section 115 of the Delaware General Corporation Law. 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. The choice of forum provision may increase costs to bring a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with FCX or its directors, officers or other employees, which may discourage such lawsuits against FCX or its directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in FCX’s By-laws to be inapplicable or unenforceable in an action, FCX may incur additional costs associated with resolving such action in other jurisdictions. The exclusive forum provision in FCX’s By-laws will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws including the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder. 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 our stockholders. Item 1B.