Bog iron [0] production was the predominant way of smelting iron before technology advanced to the point of being able to smelt iron ores. Iron Production in the Viking Age [1] has a really nice description and pictures of the process. This kind of smelting can be done with a small bloomery [2] and the resulted tiny iron specs result is called sponge iron. I wish Dwarf Fortress would implement this chain for environs that lack proper iron ores :)
There are smelting bugs in the game where melting down certain items produces more metal than it takes to make them.
That and hatch covers (building destroyers can't destroy on different z-axis) makes it really hard to lose in Fun ways. Most of my fortresses die from FPS death.