Hecla Mining Co. (NYSE: HL) has reported earnings, and a good news and bad news argument remains in place in its turnaround. While earnings were close to being in line with estimates, there is a concern that some of the ongoing pressures will continue to remain in place — perhaps even into 2016 or longer.

Hecla is a silver and gold mining outfit that remains a serious turnaround contender. If industry metrics improve, its low-cost operations should help out handily. If prices remain static or drift lower, it seems that Hecla’s turnaround may be at least somewhat out of its own hands.

Hecla reported first-quarter net earnings of $12.4 million, or $0.03 per share. This was just marginally ahead of the $11.5 million a year ago. The loss from operations came in at $0.02 per share (-$7.0 million). The consensus estimate was a loss of $0.02 per share. Revenue of $119.1 million was ahead of Thomson Reuters consensus estimate but was marginally under consensus estimates elsewhere.

One issue is that Hecla’s cash costs were higher. Hecla produced 2.9 million ounces of silver, followed by about 40,650 ounces of gold. This compares to 2.5 million ounces of silver and 46,268 ounces of gold a year ago. Hecla also produced 9,878 tonnes of lead and 16,087 tonnes of zinc. Cash costs for the first quarter were $4.93 per ounce, up from $3.83 per ounce a year ago. This was tied to lower revenue from by-products, as well as higher labor costs after more staff was added and tied to lower output at Greens Creek and 10% higher costs at Casa Berardi. Hecla sees its gold costs running $825 per ounce at Casa Berardi.

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Hecla’s higher silver output was a result of higher recoveries and higher grades at the Lucky Friday mine, followed by lesser gains at the Green’s Creek property. The lower gold production was tied to lower grades and recoveries at the Casa Berardi location.

So far, Merrill Lynch has the only major report after Hecla’s earnings report. The firm’s Michael Jalonen and Lawson Winder have an Underperform rating on the shares and a $2.60 price objective. Their report said:

Our price objective for Hecla Mining is $2.60 per share, and is based on the stock trading at 1.25 times our estimated net asset value on a net-debt-adjusted basis. Our NAV of $1.95 per share ($2.60 dcf and $0.65/share net debt) is based on a 5 percent discount rate and 10 year average silver and gold price forecasts of $19.21 and $1,299 per ounce, respectively.

Historically, North American precious metal stocks have traded between 1 and 3 times NAV, with a median of 2.00 times, and with unhedged, growth-oriented producers occupying the upper end of the range. The discount to the peak valuation multiple reflects our forecast for Hecla’s silver production to be relatively static over the next several years. Upside risks are a recovery in precious and base metal prices and finding new and unexpected silver reserves. Downside risks are commodity price weakness, the inability to secure financing for expansion or development projects, unforeseen operating problems, political, legal or permitting challenges in the regions in which the company operates, rising capital and operating costs and delays in the development of its growth projects.

Again, this is one of those earnings reports that has both good news and bad news. Higher costs have been an issue sectorwide, and Hecla has had its share of problems in the past. The consensus estimates from Thomson Reuters are -$0.03 EPS for 2015 and $0.01 EPS for 2016. For Hecla shares to recover handily, those earnings estimates will need to be beaten for turnaround investors to endorse this stock. Trading at 100-times recovery earnings just is not too cool.

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Hecla shares were up 1.3% at $3.03 Thursday, against a 52-week range of $2.00 to $3.54. Hecla has a consensus analyst price target that is lower than current share prices — down at $2.88.

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