Er...wow. So, I saw this done in Borre in 2006. It's a shit load of work.
Basically, in many areas, there is a tiny amount of iron in ground water. If a spring emerges under a bog, the wierd contitions of the bog (maybe pH, and bacteria that like it, in the same way manganese nodules are formed on the seabed) causes the iron to come out of solution. So, it'll form even slower than a stalagmite. The big difference is that there is usually clay over the spring water's exit, so the clay and the bottom layer of plant matter is 'enriched' with iron. Maybe to 30% by weight.
So, the process is to dig up the bog, until you see iron ore (check the net for details on how you can tell what it looks like
). Then, set up a decent hot charcoal fire, to smelt the ore
, and try blow out the impurities by throwing in charcoal (to get rid of oxygen) and limestone (to make slag of the rest).
Big job, but sounds like a wonderful project.