FIRST LITHIUM LIMITED — Capital/Financing Update 2008

May 13, 2008

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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

14 May 2008

ISO 9001 Lic.13705 SAI Global

The Company Announcements Office ASX Limited

By: e-lodgement (ASX code: ACE)

UNDERWRITER FOR SHARE OPTION SHORTFALL

Advanced Engine Components Limited (“ACE”) is pleased to announce that KGI Asia Limited (“KGI”) has agreed to underwrite the shortfall, if any, in the exercise of the 4,361,529 options expiring on 30 June 2008 (“June Options”).

KGI is a Hong Kong based multi faceted financial services group. It is one of Hong Kong’s largest equity brokers with over 40,000 clients and shareholder funds in excess of US$60 million.

The June Options are exercisable at 20 cents each. If all June Options are exercised they will contribute $872,306 to ACE’s working capital. KGI’s underwriting of the shortfall in the exercise value of the June Options, if any, (‘Shortfall Shares”) guarantees ACE that $872,306 will be received on or before 8 July 2008.

To provide KGI with certainty that KGI will have sufficient ACE shares to place with their clients, even if all June Options are exercised, ACE has agreed to place up to 4,361,529 shares to KGI’s nominated parties at 20 cents per share (“Placement Shares”). The Placement Shares are over and above the Shortfall Shares. The election of taking up all or any of the Placement Shares is at the total discretion of KGI. KGI must apply for the elected number of Placement Shares on or before 4 July 2008.

As a result of KGI’s underwriting agreement ACE is guaranteed to receive a minimum of $872,306 with the possibility, at KGI’s sole discretion, of receiving a maximum of $1,744,612 (before costs).

KGI can terminate the underwriting agreement if:

• (a) approval is not received from the ASX for the official quotation of the Shortfall Shares and/or the Placement Shares;

• (b) there is a material failure by ACE to perform or observe any of its material obligations under the agreement;

• (c) there is any material adverse change in the financial position or prospects of ACE;

• (d) there is any material contravention by ACE of its Constitution, the Corporations Act, the ASX Listing Rules or any other relevant law;

• (e) any director or officer of ACE is charged with or convicted of any criminal offence involving fraudulent or dishonest conduct;

• (f) there is an event of insolvency such as the appointment of a receiver, manager, administrator, liquidator or similar officer to ACE; or

• (g) standard force majeure conditions apply.

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ADVANCED ENGINE COMPONENTS LIMITED ACN: 009 081 770

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Pursuant to the agreement, KGI will receive a commission of 5% on all monies received by ACE through the exercise of the June Options, issue of Shortfall Shares and issue of Placement Shares.

ACE’s June 2008 quarter sales are expected to continue the upward sales trend of previous periods. The additional working capital received, from the issue of the June Options, Shortfall Shares and Placement Shares, will be a significant benefit as ACE moves from operating cash out flows to break even and positive cash flows within the near future.

For further information contact Tony Middleton, Managing Director, on +618 9209 6900; or email shares@advancedengine.com

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