FIRST LITHIUM LIMITED — Capital/Financing Update 2007

Oct 18, 2007

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ADVANCED ENGINE COMPONENTS LIMITED

ACN: 009 081 770

14 ENERGY STREET PO BOX 3126 MALAGA 6090 WESTERN AUSTRALIA TEL: +61 8 9209 6900 FAX: +61 8 9209 6999 ISO 9001 Lic.13705 SAI Global

19 October 2007

Dear Shareholder

UNDERWRITTEN RIGHTS ISSUE

Advanced Engine Components Limited (“ACE” or “the Company”) announced on 5 October 2007 a non-renounceable rights issue (“Rights Issue”) to raise $2.29 million before costs.

The Rights Issue will be underwritten to $2.25 million by the Company’s major shareholder, 698 Capital International Ltd.

The Rights Issue will offer 1 new share for every 9 shares held at the Record Date at 16 cents per new share. In addition, 1 free attaching option will be issued for every 2 new shares issued under the Rights Issue. The options will be exercisable at 12.8 cents on or before 30 November 2009. All fractional entitlements will be rounded up to the nearest whole number.

A total of approximately 14,339,135 new shares together with 7,169,567 free attaching options will be offered under the Rights Issue. The Company will apply to have the new shares quoted on ASX. The options will be unlisted.

Please note that shareholders at the Record Date with addresses registered outside Australia and New Zealand will not be eligible to participate in the Rights Issue.

The Rights Issue includes a shortfall facility whereby eligible shareholders may apply for additional new shares at the issue price (and attaching options) in excess of their entitlement. The shortfall will only be available subject to other shareholders not taking up their entitlements. Allocation of any shortfall will be at the discretion of the Underwriter in consultation with the Directors.

The Rights Issue Prospectus has been lodged with ASIC and ASX and is available on the Company’s website www.advancedengine.com.

The Rights Issue Prospectus and personalised Entitlement and Acceptance Form will be despatched to all eligible shareholders registered at the Record Date in accordance with the timetable below.

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ADVANCED ENGINE COMPONENTS LIMITED ACN: 009 081 770

The timetable for the Rights Issue is set out below:

Lodgement of Rights Issue Prospectus with ASIC and ASX 17 October 2007 Existing shares quoted on an “ex” basis 22 October 2007 Record Date 26 October 2007 Anticipated date of despatch of Prospectus and 1 November 2007 Entitlement and Acceptance Form to shareholders Closing Date (5.00pm WST) 19 November 2007 Existing shares quoted on a “deferred settlement” basis 20 November 2007 Allotment of New Shares and New Options 22 November 2007 Anticipated date of despatch of holding statements 26 November 2007 Anticipated date for commencement of trading of the 28 November 2007 new shares

This timetable is indicative only. The Company, in conjunction with the Underwriter, reserves the right to vary the above dates subject to the ASX Listing Rules.

On behalf of the Board I invite you to consider the information provided in the Prospectus and encourage you to participate in the Rights Issue.

Yours Sincerely

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Graham Keys Chairman

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