We are a U.S.-based metals company with substantial assets located outside of the U.S. Risks of conducting business in the countries where we operate or do business, can include:
- Delays in obtaining or renewing, or the inability to obtain, maintain or renew, or the renegotiation, cancellation, revocation or forced modification (including the inherent risk of these actions being taken unilaterally by a foreign government or government owned entity) of contracts, leases, licenses, permits, easements, rights-of-way, stability agreements or other agreements and/or approvals;- Expropriation or nationalization of property, protectionism, or restrictions on repatriation of earnings or capital;- Changes in and differing interpretations of 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, licenses, divestment, imports, exports (including restrictions on the export of copper concentrates and anode slimes, copper and/or gold), trade laws and regulations, immigration, currency, human rights and environmental matters (including land use and water use and, in some cases, consent), additional requirements on foreign operations and investment, and/or fines, fees and sanctions, criminal liability and other penalties imposed for failure to comply with the laws and regulations of the jurisdictions in which we operate, the risk of any of which may increase with rising "resource nationalism" in countries around the world;- Geopolitical tensions, conflicts and events, social and economic instability, bribery, extortion, corruption, civil unrest, blockades, acts of war, guerrilla activities, insurrection and terrorism, certain of which may result in, among other things, an inability to access our property or transport our commodities;- Risk of loss associated with illegal activity, including trespass, illegal mining, theft (including piracy), sabotage (including of critical infrastructure) and vandalism;- Changes in U.S. trade, tariff and other controls on imports and exports, tax, immigration or other policies that may impact relations with foreign countries or result in retaliatory policies;- Increases in training and other costs and challenges relating to requirements to employ nationals of a country in which a particular operation is located;- Foreign exchange controls and fluctuations in foreign currency exchange rates; and - Reduced protection for intellectual property rights.
Accordingly, our activities in the U.S. and outside of the U.S. may be substantially affected by many external factors beyond our control, any of which could have a material adverse effect on our cash flows, results of operations and financial condition.
We are required to comply with a wide range of laws and regulations in the countries where we operate or do business. For example, our international operations must comply with the U.S. Foreign Corrupt Practices Act (FCPA) and similar anti-corruption and anti-bribery laws of the other jurisdictions in which we operate. We are investigating whether activities of PT Smelting may have violated aspects of the FCPA or other laws, including laws of non-U.S. jurisdictions. PT Smelting is an Indonesian joint venture between PT-FI and Mitsubishi Materials Corporation (MMC). An affiliate of MMC serves as operator of PT Smelting (see Note 2). We have voluntarily notified the SEC and Department of Justice that we have engaged outside counsel to conduct this investigation of PT Smelting's activities. Any determination that operations or activities are not in compliance with existing laws, including the FCPA, could result in the imposition of fines, penalties and equitable remedies. We cannot currently predict the outcome of the investigation.
We operate in jurisdictions that have experienced public and private sector corruption and where significant anti-corruption enforcement activities, prosecutions and settlements have occurred. We have a large number of contracts with local and foreign business partners, including suppliers and contractors, who may take action contrary to or fail to adopt standards, controls and procedures, including health, safety, environmental, human rights and community standards that are equivalent to our standards, controls and procedures. There can be no assurance that our policies, procedures and internal controls will 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, contractors or other business partners. As such, our policies, procedures and internal controls may not prevent or detect all potential breaches of law or governance practices. Any breaches could result in safety events that may result in injuries or fatalities; significant criminal or civil fines, penalties, litigation or regulatory action or inquiries or other enforcement actions; shareholder or other stakeholder activism (such as to stop using a certain business partner); civil unrest or other adverse impacts on human rights; termination of contracts; loss of operating licenses or permits; and damage to our reputation, any of which could have a material adverse effect on our cash flows, results of operations and financial condition.
In addition, our insurance does not cover most losses caused by the risks described above. For example, we do not have political risk insurance.
We conduct international operations and exploration activities in Indonesia, Peru and Chile as well as other 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. Other risks specific to certain countries in which we operate are discussed in more detail below.