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 :)
[0] https://en.wikipedia.org/wiki/Bog_iron
[1] http://www.hurstwic.org/history/articles/manufacturing/text/...