In layman's terms, cancellation of shares is very good. It means there are less. When there are less, if the company's value remains constant, the remaining shares are worth more per unit.

Let me try to give you an example. Let's assume that the shares of KWG are really worth 25 cents each (blue sky number, sort of roughly based on a previous third-party valuation). Let's say for the sake of argument that there are a billion shares. That would imply that KWG is worth $250 million (1 billion shares at 25 cents each).

Let's say that KWG has $10 million cash and the market share price is five cents each, and so they decide to buy back as many shares as possible. With $10m, they are able to afford to buy 200 million shares. They buy those, and cancel them. The company now has 800 million shares outstanding.

Let's assume that a big company (Xstrata) wants to buy KWG out. They have already decided several months ago that KWG is worth $250 million, based on an analysis of their existing assets which includes the defined and undefined portions of the ore body (Big Daddy), their cash in bank, and other stuff. Since then, KWG has $10m less cash, but nothing else has changed, so Xstrata has decided that KWG is still worth $240 million - the original $250m estimate from a few months ago, less the $10m cash that has been spent buying back shares in the open market.

KWG now has 800m shares, and is "worth" $240m. When you divide those numbers out, the math now shows that those 800m shares are worth 30 cents each. So Xstrata might offer 30 cents per share instead of the 25 cents per share that they would have offered several months ago. There are less shares available in total, which implies that the value of each share is more.

So this buyback program is a good thing. Not only does it mean that KWG truly cares about supporting their share price and believes that their shares are worth more than the market has priced them, it also means that they are effectively putting a "floor" in place, sort of. If a bunch of people want to get rid of their KWG shares, the price probably won't drop below the present level for a while, since the company will be offering to buy for that price.

The only clarification is that I believe there was a typo in the news release. I just looked at it quickly, but I think they have either authorized $2m for purchases to buy 30m shares, or $200,000 to buy 3m shares. Hopefully it is the first. KWG has far too many shares outstanding right now, and it would be nice to retire a sizeable chunk of them.

(Notice that I just pulled some numbers above out of a hat for the sake of example purposes. I'm not sure what the accurate OS (outstanding) float is right now, but it's probably close to 800m fully-diluted).