FIRST LITHIUM LIMITED — Capital/Financing Update 2010

Jan 27, 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

28 January 2010

Company Announcements Office Australian Securities Exchange By: e-lodgement (ASX code ACE)

EQUITY RAISING and DEBT RESTRUCTURE

Equity raising

The Board of Advanced Engine Components Ltd (“ACE”) is pleased to announce a proposed placement of 21,818,182 shares to Mr Datuk Vivekananthan (“Nathan”), at $0.055 per share, to raise $1,200,000. The placement will be completed in February 2010.

Upon completion of the share placement ACE will make a non renounceable rights issue offer to shareholders, including Nathan, on the basis of one new share for every three shares held. The rights issue shares will be offered at $0.055 per share. Shareholders will have the opportunity to apply for additional shares from any shortfall.

Nathan, together with all ACE Directors, have confirmed their intention to subscribe for their full personal share entitlements in the rights issue.

Nathan and Manharlal Bhaichand Gathani Jain (M B Gathani) will be appointed Directors of ACE.

Nathan has been a top ten shareholder in ACE since it listed on the Australian Securities Exchange in February 2000. Nathan is the Deputy Executive Chairman of Deleum Berhad. Deleum Berhad is a Malaysian based public listed company which has been supplying a diverse range of supporting specialised products and services to the oil and gas industry for over 25 years. Nathan is also a council member of the Malaysian Gas Association.

Mr Gathani is an Executive Director of PKF Tax Services Sdn Bhd in Malaysia.

Debt restructure

698 Capital Asia Pacific Ltd (“698”), a party related to ACE’s major shareholder, has agreed to a restructure of the terms of their following loans to ACE: $750,000 short term loan; $3,000,000 sales financing facility; and $3,000,000 due under the expired convertible notes.

The $750,000 short term loan and the $3,000,000 sales financing facility, together with all outstanding interest, will be consolidated as one loan. The loan will retain the existing security of a fixed charge over the accounts receivable and inventory of ACE; continue at the current interest rate of 11.68% with interest payable quarterly in arrears; and the loan is repayable at call.

Repayment of the $3,000,000 due under the expired convertible notes will be extended to 31 December 2011. The loan will retain the existing fixed and floating charge over the assets of ACE; and retain the same interest rate being the Better Business Loan Reference Rate as quoted by the Commonwealth Bank plus 1%.

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ADVANCED ENGINE COMPONENTS LIMITED ACN: 009 081 770

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698 has agreed to take up 20,000,000 shares of its 21,474,577 share entitlement under the rights issue. 698’s equity subscription will raise $1,100,000 which will be used to pay the accrued interest on the expired convertible notes.

Subject to ACE shareholder approval, 698 will receive 3,000,000 options, exercisable at $0.055 per share on or before 30 November 2011, as consideration for extending its loan facilities.

Other than its $1,100,000 rights issue subscription, 698 has agreed that monies raised through the current share placement and rights issue will not be called upon to repay any of its existing loan or accrued interest facilities.

Shareholdings

Set out below is an indicative summary of the shareholding position after the share placement, rights issue and debt restructure:

	Current		Post new share	issues	Post new share	issues
	shareholdings		(Note 1)		(Note 2)
698	64,423,731	43.2%	84,423,731	37.1%	84,423,731	39.4%
Nathan	1,125,000	0.8%	30,590,909	13.4%	30,590,909	14.3%
Other	83,509,864	56.0%	112,821,063	49.5%	99,417,621	46.3%
Total	149,058,595	100.0%	227,835,703	100.0%	214,432,261	100.0%

Note (1) 100% of rights issue shares are taken up by shareholders raising a total of $4,332,741 through the placement and rights issue.

Note (2) 50% of rights issue shares (in addition to the 30,152,043 rights issue shares taken up by 698, Nathan and the Directors) are taken up by other shareholders raising a total of $3,595,552 through the placement and rights issue.

Full details of the rights issue, the proposed timetable and associated Appendix 3B will be announced by ACE in February 2010 following completion of the placement.

The share placement, rights issue and debt restructure will provide an immediate $1.2 million cash injection, introduce working capital funds (including the placement) of a minimum $2.9 million and maximum $4.3 million, reduce current liabilities by $4.1 million, add a major shareholder to the share register, strengthen the Board of Directors and allow all shareholders the opportunity to acquire shares at the $0.055 share placement price.

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

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