To make Iron you first need Iron Scraps. These can be found in Sunken Crypts located in Swamp areas. Look for Muddy Scrap Piles inside of the crypts and mine them with a Pickaxe. Be sure to move your cursor around the piles, sometimes your pickaxe can miss scraps to mine. Once you have Scrap Iron, use a Smelter to turn them into Iron which you can use to craft equipment with at a Forge.