FIRST LITHIUM LIMITED — Capital/Financing Update 2010

Feb 22, 2010

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ADVANCED ENGINE COMPONENTS LIMITED

ACN: 009 081 770

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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

23 February 2010

Company Announcements Office Australian Securities Exchange

By: e-lodgement (ASX code ACE)

RIGHTS ISSUE

As announced on 28 January 2010, Advanced Engine Components Limited (“ACE” or “the Company”) will be offering all eligible shareholders the opportunity to participate in a non-renounceable rights issue (Rights Issue) on the basis of 1 new share for every 3 shares held as at 5.00pm (WST) on 3 March 2010. Fractional entitlements will be rounded up.

Shares under the Rights Issue will be offered at 5.5 cents, giving shareholders the opportunity to increase their investment in the Company at the same price as the $1,200,000 placement completed on 18 February 2010 and without any brokerage fees.

All shareholders registered in Australia, New Zealand, Hong Kong and Malaysia as at the record date will be eligible to participate.

The number of shares to be issued under the Rights Issue, if fully subscribed, is approximately 56,958,926. The shares will rank equally with all other shares of the Company from date of allotment and the Company will apply for ASX quotation of the shares.

Eligible shareholders will be given the right to apply for additional shares at the same price from any shortfall under the Rights Issue. Allocation of any shortfall will be at the discretion of the Directors. The Directors also reserve the right to place any shortfall within three months of the close of the Rights Issue.

The Rights Issue is not underwritten. The Company’s major shareholder, 698 Capital International Ltd (698) has agreed to take up 20,000,000 shares of its 21,474,577 share entitlement under the Rights Issue being $1,100,000. All ACE Directors, including newly appointed Director Mr Nathan, have confirmed their intention to subscribe for their full personal share entitlements in the Rights Issue.

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ADVANCED ENGINE COMPONENTS LIMITED ACN: 009 081 770

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The Rights Issue will raise up to approximately $3,132,741 if fully subscribed. The funds raised will be used by the Company to provide working capital support for its ongoing sales commitments with $1,100,000 used to pay the accrued interest on the expired convertible notes held by 698 (or its related party). Other than 698’s $1,100,000 Rights Issue subscription, 698 has agreed that monies raised through the Rights Issue will not be called upon to repay any of its existing loan or accrued interest facilities.

The Company hereby gives notice that:

• 1) it will offer the shares for issue under the Rights Issue (and offered the 21, 818,182 shares under the placement on 18 February 2010 as announced by the Company) without disclosure to investors under Part 6D.2 of the Corporations Act (“Act”);

• 2) this notice is provided under paragraph 2(f) of section 708AA of the Act with respect to the Rights Issue and under paragraph (5)(e) of section 708A with respect to the above share placement;

• 3) as at the date of this notice, the Company has complied with the provisions of Chapter 2M of the Act as they apply to the Company and section 674;

• 4) as at the date of this notice, there is no information:

• a) that has been excluded from a continuous disclosure notice in accordance with the ASX Listing Rules; and

• b) that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of:

  • i) the assets and liabilities, financial position and performance, profits and losses and prospects of the Company; or

  • ii) the rights and liabilities attaching to the shares; and

• 6) the issue of the shares pursuant to the Rights Issue is not expected to have any material effect or consequence on the control of the Company.

A proposed timetable and Appendix 3B in relation to the Rights Issue are attached.

The Rights Issue provides an opportunity for participation by all eligible shareholders at the same price as the recent placement. The commitment of 698 and all ACE Directors regarding their Rights Issue entitlements illustrates the continued support of the Company’s major shareholders.

For further information please contact: Tony Middleton (Managing Director) on (08) 9209 6900; or email shares@advancedengine.com

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ADVANCED ENGINE COMPONENTS LIMITED

ACN: 009 081 770

PROPOSED RIGHTS ISSUE TIMETABLE

	2010
Announcement Date	23 February
Shares trade ex-entitlements	25 February
Record Date (5.00pm WST) (date for determining entitlements of eligible shareholders to participate in the Rights Issue)	3 March
Offer Document and Entitlement and Acceptance Form dispatched to eligible shareholders	9 March
Opening Date (9.00am WST)	10 March
Closing Date (5.00pm WST)	30 March
Company to notify ASX of under-subscriptions (if any)	6 April
Allotment and issue of shares	8 April
ASX trading of shares commences	9 April
Dispatch of holding statements	9 April
The above timetable is indicative only. The Company reserves the right, subject to ASIC and ASX requirements, to extend the Closing Date at its discretion. Should this occur, the extension will have a consequential effect on the subsequent dates.

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Appendix 3B New issue announcement

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX’s property and may be made public.

Introduced 1/7/96. Origin: Appendix 5. Amended 1/7/98, 1/9/99, 1/7/2000, 30/9/2001, 11/3/2002, 1/1/2003, 24/10/2005.

Name of entity

ADVANCED ENGINE COMPONENTS LIMITED

ACN

009 081 770

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

1 +Class of+securities issued or to be issued 2 Number of+securities issued or to be issued (if known) or maximum number which may be issued 3 Principal terms of the+securities (eg, if options, exercise price and expiry date; if partly paid +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)	Fully paid ordinary shares
	Approximately 56,958,926 shares
	Fully paid ordinary shares

• See chapter 19 for defined terms.

24/10/2005 Appendix 3B Page 1

Appendix 3B New issue announcement

4 Do the+securities rank equally in all respects from the date of allotment with an existing+class of quoted +securities? If the additional securities do not rank equally, please state: • the date from which they do • the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment • the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 5 Issue price or consideration 6 Purpose of the issue (If issued as consideration for the acquisition of assets, clearly identify those assets) 7 Dates of entering+securities into uncertificated holdings or despatch of certificates 8 Number and+class of all+securities quoted on ASX (_including_the securities in clause 2 if applicable)	Yes - ordinary shares	Yes - ordinary shares
	$0.055 per share
	Proposed Rights Issue to provide working capital support for its ongoing sales commitments and payment of accrued interest on the expired convertible notes.
	Expected to be 8 April 2010
	Number	+Class
	Approximately 227,835,703	Ordinary shares

• See chapter 19 for defined terms.

24/10/2005

Appendix 3B Page 2

Appendix 3B New issue announcement

9 Number and +class of all +securities not quoted on ASX (_including_the securities in clause 2 if applicable) 10 Dividend policy (in the case of a trust, distribution policy) on the increased capital (interests)	Number	+Class
	5,505,000 1,180,000 2,500,000 1,250,000 1,250,000 2,500,000 750,000 750,000 1,750,000 1,750,000 1,750,000 1,750,000 750,000 1,000,000 750,000	Options exercisable at $0.20 on or before 31 December 2010. Options exercisable at $0.18 on or before 31 December 2010. Options exercisable at $0.06 on or before 30 November 2011. Options exercisable at $0.055 on or before 30 November 2011. Options exercisable at $0.05 on or before 30 November 2011. Options exercisable at $0.047 on or before 30 November 2011. Options exercisable at $0.044 on or before 30 November 2011. Options exercisable at $0.043 on or before 30 November 2011. Options exercisable at $0.036 on or before 30 November 2011. Options exercisable at $0.037 on or before 30 November 2011. Options exercisable at $0.071 on or before 30 November 2011. Options exercisable at $0.062 on or before 30 November 2011. Options exercisable at $0.059 on or before 30 November 2011. Options exercisable at $0.0565 on or before 30 November 2011. Options exercisable at $0.054 on or before 30 November 2011.
	NA

• See chapter 19 for defined terms.

24/10/2005 Appendix 3B Page 3

Appendix 3B New issue announcement

Part 2 - Bonus issue or pro rata issue

11 Is security holder approval required? 12 Is the issue renounceable or non- renounceable? 13 Ratio in which the+securities will be offered 14 +Class of+securities to which the offer relates 15 +Record date to determine entitlements 16 Will holdings on different registers (or subregisters) be aggregated for calculating entitlements? 17 Policy for deciding entitlements in relation to fractions 18 Names of countries in which the entity has+security holders who will not be sent new issue documents Note: Security holders must be told how their entitlements are to be dealt with. Cross reference: rule 7.7. 19 Closing date for receipt of acceptances or renunciations 20 Names of any underwriters 21 Amount of any underwriting fee or commission 22 Names of any brokers to the issue 23 Fee or commission payable to the broker to the issue	No
	Non-renounceable
	1 new share for every 3 existing shares held
	Ordinary fully paid shares
	3 March 2010
	No
	Rounded up to the nearest whole number
	All countries other than Australia, New Zealand, Hong Kong and Malaysia
	30 March 2010
	N/A
	N/A
	N/A
	N/A

• See chapter 19 for defined terms.

24/10/2005

Appendix 3B Page 4

Appendix 3B New issue announcement

24 Amount of any handling fee payable to brokers who lodge acceptances or renunciations on behalf of+security holders 25 If the issue is contingent on +security holders’ approval, the date of the meeting 26 Date entitlement and acceptance form and prospectus or Product Disclosure Statement will be sent to persons entitled 27 If the entity has issued options, and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders 28 Date rights trading will begin (if applicable) 29 Date rights trading will end (if applicable) 30 How do+security holders sell their entitlements_in full_through a broker? 31 How do+security holders sell_part_ of their entitlements through a broker and accept for the balance? 32 How do+security holders dispose of their entitlements (except by sale through a broker)? 33 +Despatch date	N/A
	N/A
	9 March 2010
	23 February 2010
	N/A
	N/A
	N/A
	N/A
	N/A
	8 April 2010

• See chapter 19 for defined terms.

24/10/2005 Appendix 3B Page 5

Appendix 3B New issue announcement

Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

34 Type of securities ( tick one ) (a)[Securities described in Part 1 ] (b)[All other securities ]

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

35 If the[+] securities are[+] equity securities, the names of the 20 largest holders of the additional[+] securities, and the number and percentage of additional[+] securities held by those holders 36 If the[+] securities are[+] equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over 37 A copy of any trust deed for the additional[+] securities

Entities that have ticked box 34(b)

38 Number of securities for which NA +quotation is sought 39 Class of +securities for which quotation is sought

• See chapter 19 for defined terms.

24/10/2005

Appendix 3B Page 6

Appendix 3B New issue announcement

40 Do the[+] securities rank equally in all respects from the date of allotment with an existing[+] class of quoted +securities?

If the additional securities do not rank equally, please state:

• the date from which they do

• the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

• the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

41 Reason for request for quotation now

Example: In the case of restricted securities, end of restriction period

(if issued upon conversion of another security, clearly identify that other security)

Number +Class

42 Number and[+] class of all[+] securities quoted on ASX ( including the securities in clause 38)

Quotation agreement

• 1 +Quotation of our additional +securities is in ASX’s absolute discretion. ASX may quote the[+] securities on any conditions it decides.

• 2 We warrant the following to ASX.

• The issue of the[+] securities to be quoted complies with the law and is not for an illegal purpose.

• There is no reason why those[+] securities should not be granted[+] quotation.

• An offer of the[+] securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• See chapter 19 for defined terms.

24/10/2005 Appendix 3B Page 7

Appendix 3B New issue announcement

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any[+] securities to be quoted and that no-one has any right to return any[+] securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the[+] securities be quoted.

• If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the[+] securities be quoted.

• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.

• 4 We give ASX the information and documents required by this form. If any information or document not available now, will give it to ASX before[+] quotation of the[+] securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

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Sign here: Company secretary Print name: Susan Hunter

Date: 23 February 2010

• See chapter 19 for defined terms.

24/10/2005

Appendix 3B Page 8