FIRST LITHIUM LIMITED — Interim / Quarterly Report 2008

Jan 29, 2009

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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

30 January 2008

Company Announcements Office The Australian Stock Exchange Limited

By: e-lodgement (ASX code ACE)

December 2008 - Quarterly Activities Summary

Advanced Engine Components Ltd (“ACE”) sales were 40% higher and receipts from customers 50% higher, in the six months to 31 December 2008, than the corresponding period for 2007.

The December 2008 quarter saw a drop in demand for ACE products, due to the global financial crisis, together with delayed customer payments and deferred deliveries. As a result, sales and receipts were approximately 40% and 50% lower, respectively, in the December 2008 when compared to the September 2008 quarter.

The slowing demand, delayed payments and deferred deliveries also led to a build up of accounts receivable and inventory in the December 2008 quarter. Accounts receivable and inventory, at approximately A$5.8 million, is 30% higher than the accounts receivable and inventory balance at 30 September 2008. ACE is working on repayment plans with major customers to systematically reduce the amounts outstanding and is confident, with known demand, that inventory levels can be significantly reduced in the March 2009 quarter.

As well as focussing on cash generation, from accounts receivable and inventories, ACE management is reviewing all possible cost cutting measures. Cash generation and cost reductions require a delicate balance to ensure ACE’s ability to meet customer demand in the March 2009 quarter and beyond is not compromised.

Funding of the increased levels of accounts receivable and inventory principally came from the A$2m sales financing facility (refer ASX announcement 12 August 2008) provided by 698 Capital Asia Pacific Limited, a related party to ACE’s major shareholder.

The ACE Board remain confident in sales potential for the immediate, medium and long term future. Sales orders received for delivery in the March 2009 quarter already exceed sales recorded for the December 2008 quarter. Trials conducted throughout China, over the last 18 months, are expected to convert to recurring orders throughout calendar 2009 and beyond. The addition of Tata Motors (refer ASX announcements of 31 October 2008 and 18 December 2008) as an ACE customer will commence generating additional significant sales in the 2010 calendar year.

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

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Appendix 4C Quarterly report for entities admitted on the basis of commitments

Rule 4.7B

Appendix 4C

Quarterly report for entities admitted on the basis of commitments

Introduced 31/3/2000. Amended 30/9/2001

Name of entity ADVANCED ENGINE COMPONENTS LIMITED

ABN 67 009 081 770	Quarter ended (“current quarter”)
67 009 081 770	31 December 2008

Consolidated statement of cash flows

Cash flows related to operating activities 1.1 Receipts from customers 1.2 Payments for (a) staff costs (b) advertising and marketing (c) research and development (d) leased assets (e) other working capital 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other: Receipt of Government Grants Net operating cash flows	Current quarter $A’000	Year to date (6 months) $A’000
	715 (312) (37) (212) - (1,228) - 2 (45) - 124	2,139 (604) (99) (425) - (3,150) - 4 (85) - 124
	(993)	(2,096)

• See chapter 19 for defined terms.

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Appendix 4C Quarterly report for entities admitted on the basis of commitments

	Current quarter $A’000	Year to date (6 months) $A’000
1.8 Net operating cash flows (carried forward)	(993)	(2,096)
Cash flows related to investing activities 1.9 Payment for acquisition of: (a) businesses (item 5) (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.10 Proceeds from disposal of: (a) businesses (item 5) (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.11 Loans to other entities 1.12 Loans repaid by other entities 1.13 Other (provide details if material) Net investing cash flows 1.14 Total operating and investing cash flows	- - - (7) (278) - - - - - - - -	- - - (8) (561) - - - - - - - -
	(285)	(569)
	(1,278)	(2,665)
Cash flows related to financing activities 1.15 Proceeds from issues of shares, options, etc. 1.16 Proceeds from sale of forfeited shares 1.17 Proceeds from borrowings (item 3.1) 1.18 Repayment of borrowings 1.19 Dividends paid 1.20 Costs associated with issue of shares Net financing cash flows	- - 1,209 (59) - (6)	873 - 2,210 (503) - (75)
	1,144	2,505
Net increase (decrease) in cash held 1.21 Cash at beginning of quarter/year to date 1.22 Exchange rate adjustments to item 1.20 1.23 Cash at end of quarter	(134) 207 -	(160) 233 -
	73	73

• See chapter 19 for defined terms.

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Appendix 4C Quarterly report for entities admitted on the basis of commitments

Payments to directors of the entity and associates of the directors

Payments to related entities of the entity and associates of the related entities

1.24 1.25	Aggregate amount of payments to the parties included in item 1.2 & 1.17 Aggregate amount of loans to the parties included in item 1.11	Current quarter $A'000
		40
		-
1.26	Explanation necessary for an understanding of the transactions
	- Salary payments to the executive director of the Company amounting to $40,000.

Non-cash financing and investing activities

• 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

• ACE facilitated a US$700,000 loan from an unrelated company, CCM Global Limited, to the Thailand joint venture company, Monika AEC Limited. The loan was delivered directly to Monika AEC Limited and did not involve cash flow through ACE. ACE has recorded an asset and a liability of US$700,000 in the consolidated accounts. For facilitating the loan ACE is entitled to a margin on interest payable.

• 2.2 Details of outlays made by other entities to establish or increase their share in businesses in which the reporting entity has an interest

• N/A

Financing facilities available

Add notes as necessary for an understanding of the position. (See AASB 1026 paragraph 12.2).

3.1 Loan facilities 3.2 Credit standby arrangements	Amount available $A’000	Amount used $A’000
	2,000	2,000
	-	-

• See chapter 19 for defined terms.

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Appendix 4C Quarterly report for entities admitted on the basis of commitments

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current quarter $A’000	Previous quarter $A’000
4.1 Cash on hand and at bank 4.2 Deposits at call 4.3 Bank overdraft 4.4 Other	73	207
	-	-
	-	-
	-	-
Total: cash at end of quarter(item 1.23)	73	207

Acquisitions and disposals of business entities

5.1 Name of entity 5.2 Place of incorporation or registration 5.3 Consideration for acquisition or disposal 5.4 Total net assets 5.5 Nature of business	Acquisitions (Item 1.9(a))	Disposals (Item 1.10(a))
	-	-
	-	-
	-	-
	-	-
	-	-

Compliance statement

• 1 This statement has been prepared under accounting policies, which comply with accounting standards as defined in the Corporations Act (except to the extent that information is not required because of note 2) or other standards acceptable to ASX.

• 2 This statement does give a true and fair view of the matters disclosed.

Sign here:

.....................................................

Date: 30 January 2009

Managing Director

Print name: Antony Middleton

• See chapter 19 for defined terms.

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Notes

1. The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

2. The definitions in, and provisions of, AASB 1026: Statement of Cash Flows apply to this report except for the paragraphs of the Standard set out below.

3. 6.2 - reconciliation of cash flows arising from operating activities to operating profit or loss

4. 9.2 - itemised disclosure relating to acquisitions

5. • 9.4 - itemised disclosure relating to disposals • 12.1(a) - policy for classification of cash items • 12.3 - disclosure of restrictions on use of cash • 13.1 - comparative information

6. Accounting Standards. ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

7. See chapter 19 for defined terms.

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