FIRST LITHIUM LIMITED — Capital/Financing Update 2007

Oct 15, 2007

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16 October 2007

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

Dear Optionholder

UNDERWRITTEN RIGHTS ISSUE

As you are aware, you are the holder of options over ordinary shares in Advanced Engine Components Limited (“ACE” or “the Company”).

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 16 cents per new share to all shareholders registered in Australia and New Zealand at the record date. 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. The options will be unlisted.

I am writing to advise you that as an optionholder you are not entitled to participate in new issues of securities as these are only available to shareholders. You may participate in the Rights Issue to shareholders if your options are exercised and the shares issued before the record date to be set on or about 26 October 2007.

If you wish to exercise your options, please follow the instructions detailed in the terms of your options or contact the Company’s Share Registry as follows:

Computershare Investor Services Pty Limited Level 2, Reserve Bank Building 45 St Georges Tce PERTH WA 6000 Ph: (08) 9323 2000 or 1300 557 010

Please note that a notice of exercise is only effective when the Company has received the full amount of the exercise price in cash or cleared funds. If you wish to exercise your options and participate in the Rights Issue, I encourage you to send the completed and signed notice of exercise, together with the payment of the exercise price and the options statement to the Company’s Share Registry as soon as possible.

Yours Sincerely

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Graham Keys Chairman

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