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Be mindful that some trees and such will return "Too hard" as well. So you might have to clear a few things or just try it in an open area.
Probably faster to just hunt and kill the Ooze things though since they can also drop iron.
Wiki lists 33% drop rate on iron on the oozers and they're not that common.
iron in the swamp returns "0" not "too hard". Silver returns "Too hard" But other than that small detail, JimmyLurks is spot on.
I hope it's not a bug because I don't always like to carry my key around when I explore / go mining. It takes a little while to find the right spot, but once you do, it works like a charm