Iron is a mineral commonly found inside stone blocks underground or in cliffs as shown in the picture. Currently its only function is to give the player an iron block if mined. It was introduced in Creative mode in update 0.28.
In Indev, iron ore can be smelted in a furnace to make an iron ingot; iron ingots are used to make all the medium quality tools: armor and Flint and Steel.
In Alpha, iron ore requires a stone, iron, gold, or diamond pickaxe to successfully extract.
A list of craftable items can be found here.
Looks like we've got ourselves some iron, boys
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