Notes to the consolidated financial statements 30 June 2022 (continued) 29 Share-based payments (continued) (b) LTI - Performance Rights Under the LTI scheme, participants are granted performance rights which will only vest if certain performance conditions are met and the employees are still employed by the Group at the end of the vesting period. Participation in the LTI scheme is at the Board’s discretion and no individual has a contractual right to participate in the scheme or to receive any guaranteed benefits. Equity settled awards outstanding Set out below are summaries of performance rights granted under the LTI scheme: 2022 2021 Number of share rights Weighted average fair value at grant date Number of share rights Weighted average fair value at grant date Outstanding at the beginning of the year 2,560,041 3.31 2,690,866 3.20 Rights issued during the year 570,045 8.35 934,917 2.87 Rights vested during the year (715,516) 2.66 (819,643) 2.52 Rights lapsed during the year (59,444) 2.66 (103,943) 3.64 Rights cancelled during the year (177,543) 4.41 (142,156) 2.52 Outstanding at the end of the year 2,177,583 4.87 2,560,041 3.31 The share-based payments expense relating to performance rights included in profit or loss for the year totalled $3,317,624 (2021: $2,727,688). Fair value of performance rights granted The fair value of the share rights granted during the year ended 30 June 2022 are determined using a trinomial tree which has been adopted by the Boyle and Law (1994) node alignment algorithm to improve accuracy, with the following inputs: Fair value inputs CEO Senior management Other employees Grant date 18 November 2021 22 October 2021 22 October 2021 Vesting date 1 July 2024 1 July 2024 1 July 2024 Share price at grant date 9.97 9.55 9.55 Fair value estimate at grant date 8.68 8.28 8.28 Expected share price volatility (%) 41.68 41.52 41.52 Expected dividend yield (%) 0.60 0.63 0.63 Expected risk-free rate (%) 0.65 0.97 0.97 Vesting conditions of performance rights granted Vesting of the performance rights granted to executive directors, executives and other employees during the year is based on a number of performance hurdles as follows: Performance Hurdle Weighting Relative TSR performance 20% Absolute TSR performance 20% Reserve growth per share 20% EBITDA average margin 20% Climate change response progress 10% Relative people and performance culture 10% Notes to the consolidated financial statements 30 June 2022 (continued) 29 Share-based payments (continued) (b) LTI - Performance Rights (continued) Relative TSR The relative TSR (total shareholder return) scorecard for the three year measurement period will be determined based on a percentile ranking of the Company's TSR results relative to the TSR of each of the companies in the comparator group over the same three year measurement period. The comparator group is a peer group comprised of members of the S&P ASX 300 Metals and Mining Index and a number of overseas listed mining companies. The Board has discretion to adjust the peer group from time to time in its absolute discretion. The vesting schedule for the 20% of the performance rights subject to relative TSR testing is as follows: Relative TSR performance Level of vesting Less than 50th percentile 0% Between 50th and 75th percentile 50% plus straight-line pro-rata between 50% and 100% 75th percentile or better 100% Absolute TSR The absolute TSR scorecard for the three year measurement period will be determined based on an increase in absolute TSR of the Company over the three year measurement period. The vesting schedule for the 20% of the performance rights subject to absolute TSR testing is as follows: Absolute TSR performance Level of vesting Less than 10% per annum return 0% Between 10% and 20% per annum return 33% plus straight line pro-rata between 33% and 100% 20% per annum return or better 100% Reserve growth per share The reserve growth per share performance condition will be determined as ore reserve growth in excess of depletion over the three-year measurement period. Baseline ore reserves means the Group's nickel equivalent ore reserve at the start of the performance period as determined by the Board, and includes the Group's 24.99% indirect share of the Greenbushes Lithium Mine ore reserve. The vesting schedule for the 20% of the performance rights subject to reserve growth per share testing is as follows: Growth in Ore Reserves per share performance Level of vesting Less than 100% of Baseline Ore Reserves 0% Between 100% and 110% of Baseline Ore Reserves 50% plus straight line pro-rata between 50% and 100% 110% Baseline Ore Reserves or more 100% EBITDA average margin The average underlying EBITDA margin will be measured over the three-year measurement period. The vesting schedule for the 20% of the performance rights subject to average underlying EBITDA margin testing is as follows: Average Group Underlying EBITDA margin Level of vesting Less than 20% average margin 0% Between 20% and 40% average margin 33% plus straight-line pro-rata between 33% and 100% 40% average margin or better 100% Notes to the consolidated financial statements 30 June 2022 Notes to the consolidated financial statements 30 June 2022 144 — IGO ANNUAL REPORT 2022 IGO ANNUAL REPORT 2022 — 145
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