E3 Lithium : 2023 Q1 MD&A

Management's

Discussion and

Analysis

For the three months ended March 31, 2023

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following Management's Discussion and Analysis ("MD&A") has been prepared by management as of May 25, 2023 and provides a summary of the activities, results of operations, and financial condition of E3 Lithium Ltd. ("E3 Lithium" or the "Company") as at and for the three months ended March 31, 2023 and should be read in conjunction with the unaudited condensed consolidated interim financial statements as at and for the three months ended March 31, 2023, and the MD&A and audited consolidated financial statements for the year ended December 31, 2022 and related notes thereto, which are prepared in accordance with International Financial Reporting Standards ("IFRS"). All amounts are stated in thousands of Canadian Dollars unless otherwise indicated. This MD&A should also be read in conjunction with "Forward-Looking Statements" below. Additional information about E3 Lithium is available on E3 Lithium's website www.e3lithium.caand on SEDAR at www.sedar.com,including the Company's most recently filed Annual Information Form.

BUSINESS OVERVIEW

E3 Lithium is a lithium resource company with a current focus on commercial development of lithium extraction from brines contained in its mineral properties in Alberta. E3 Lithium's shares are listed on the TSX Venture Exchange under the symbol ETL.

E3 LITHIUM'S STRATEGIC VISION

Our vision is to be a global leader in responsibly sourced lithium, fueling the global transition towards a brighter energy future. We are focused on creating long-term, sustainable value for the future by creating a world-class,large-scale,long-life lithium production company. We are focused on safe operations, maintaining a strong balance sheet and taking advantage of the enormous potential across our world-class asset base.

MARKET OUTLOOK

Although current lithium hydroxide prices have softened, market data indicates demand for lithium remains strong in the medium-to-long term, with a forecast lithium supply deficit that may start as early as 2024 and continue into the later part of this decade due to sustained demand growth and a lack of producing mines, creating a favorable market environment that will likely coincide with our planned first lithium production and commercial facility in 2026.

Q1 2023 HIGHLIGHTS

2023 Catalysts: Path to first lithium

First quarter 2023 set E3 Lithium firmly on the path and direction outlined in our 2023 guidance announced on March 2, 2023. We believe in our comprehensive strategy and focused path to first lithium production and are well positioned to continue to execute.

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Increased land position by acquiring last remaining permit in the Bashaw District

On January 25, 2023, the Company announced it had acquired the last remaining tenure for metallic and industrial minerals in the Exshaw Area of the Bashaw District. The permit was acquired directly from the Government of Alberta and covers 4,606 hectares. In addition to increasing E3 Lithium's permit area, it ensures a continuous land position in the Bashaw District, in which first commercial operations are planned.

Awarded $3.5M in funding from Government of Canada

On March 7, 2023, E3 Lithium announced that it had been awarded $3.5 million in funding through Natural Resources Canada's Critical Minerals Research, Development and Demonstration ("CMRDD") program. The non- dilutive and non-repayable funds will be used to support the construction and operation of E3 Lithium's 2023 field pilot plant. The funding from the Government of Canada is non-share dilutive and is not required to be repaid. E3 Lithium shall submit and be reimbursed for eligible expenses on an ongoing basis throughout the term of the agreement. Additional and previously announced funding to support E3 Lithium's pilot plant includes a $1.8 million grant from Alberta Innovates and a $27 million conditionally repayable investment from the Strategic Innovation Fund to support a breadth of development costs towards E3 Lithium's commercial operations.

Resource upgrade to 16.0 million tonnes Measured and Indicated ("M&I")

On March 21, 2023 E3 Lithium announced the upgrade of its mineral resource to Measured and Indicated (M&I). The mineral resource upgrade includes 6.6 million tonnes (Mt) of Lithium Carbonate Equivalent ("LCE") Measured and 9.4 Mt of LCE Indicated for a total of 16.0 Mt M&I within its Bashaw District. On April 20, 2023, the Company filed its E3 Lithium 43-101 Technical Report: Lithium Resource Estimate, Bashaw District Project, Central Alberta further to its news release dated March 21, 2023. The report is available on www.sedar.com and www.e3lithium.ca/technical-reports.TheQualified Persons for the above report are Daron Abbey, M.Sc., P.Geo and Alex Haluszka, M.Sc., P.Geo of Matrix Solutions Inc. and Peter Ehren, M.Sc. AusIMM of Ehren-González Limitada.

DLE Field Pilot Plant

On April 11, 2023 the Company announced it had received approval on its Facility Application from the Alberta Energy Regulator ("AER") for its 2023 field pilot plant. The field pilot is on target to be constructed and operational during Q3 2023, where we will demonstrate ion exchange Direct Lithium Extraction ("DLE") technology under real world operating conditions. As of the end of Q1 2023, we were in the process of completing the final engineering, design and construction plans for the plant with a goal of commissioning equipment on site in Q3 2023. On May 16, 2023 E3 Lithium began field pilot plant site construction and plans to share Key Performance Indicators for the lithium extraction processes at the pilot plant prior to commissioning.

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SUMMARY OF OPERATIONS

Operating Expenses

	Three months ended March 31
	2023	2022	% Change
Operating expenses	116	-	100%

Operating expenses consist primarily of lease rentals, property taxes, repairs & maintenance and other costs incurred to maintain and operate the Company's lithium evaluation wells. During the three months ended March 31, 2023, the Company incurred $0.1 million in operating expenses with no similar charges in the prior year comparative period as the Company's drilling program commenced in the second quarter of 2022.

Business Development and Marketing

	Three months ended March 31
	2023	2022	% Change
Business development and	979	405	142%
marketing

Business development expenditures are comprised of costs incurred for building strategic relationships and exploring potential partnership offtake opportunities. Marketing expenditure refers primarily to the costs of advertising, conferences, and external consulting fees incurred for brand building and strategic positioning. For the three months ended March 31, 2023, business development and marketing expenses were $1.0 million as compared to $0.4 million in the same period of prior year as the Company continues building on its marketing strategy and relationship development.

General and Administrative

	Three months ended March 31
	2023	2022	% Change
General and administrative	850	480	77%

General and administrative expenses were $0.9 million for the three months ended March 31, 2023, an increase of $0.4 million from the comparable period in the prior year. General and administrative costs increased relative to the prior year as a result of a higher headcount and general office-related expenditures.

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Share-Based Compensation

	Three months ended March 31
	2023	2022	% Change
Share-based compensation	590	377	56%

Share-based compensation refers to compensation expenses resulting from the issuance and vesting of equity- based rewards. For the three months ended March 31, 2023, share-based compensation was $0.6 million, compared to $0.4 million in the comparable prior year period due to 2.8 million options issued during 2022.

		Weighted Average
	Stock Options	Exercise Price ($)
Balance, January 1, 2022	2,876,750		1.42
Granted	2,750,000		2.57
Exercised	(67,900)		0.91
Forfeited/expired	(533,083)		2.17
Balance, December 31, 2022	5,025,767		1.98
Granted	-		-
Exercised	(85,000)		1.08
Forfeited/expired	(55,767)		2.41
Balance, March 31, 2023	4,885,000		1.99
Financing Expenses
	Three months ended March 31
	2023	2022	% Change
Accretion	2	-	100%
Interest on leases	12	6	100%
	14	6	133%

Financing expenses relate to interest expense from the Company's head office and laboratory leases and accretion on its decommissioning obligations from its three-well exploratory program which commenced during the second quarter of 2022.

Depreciation

	Three months ended March 31
	2023	2022	% Change
Depreciation	39	56	(30%)

For the three months ended March 31, 2023, depreciation was lower than the comparable period in 2022. The Company uses the declining balance method on the majority of its corporate assets resulting in lower depreciation relative to prior year.

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