Iron Deposits can typically be found inside of Caves. They are a destructible entity, and they drop between 1-4 iron nuggets when destroyed. As all other resources, the deposit will respawn after 00:00 server time or when the time is set as you speak with an innkeeper. In certain places, Iron deposits can be found beside hills and cliff sides.
When it comes to iron deposit farming, there seem to be two viable approaches. Focusing one's attention on pre-generated caves in the sides of mountains may be the most direct approach, and initially the most fruitful as well. The deposits seemingly only spawn inside of these caves, although some can be found in the occasional abbreviated overhang at the base of mountains. It is suggested that players make mental notes of the locations of the iron-saturated caves, as there is no in-game method of map-marking. The second approach to iron farming is a little more involved. Players have the option of simply using bombs to blast their way into a mountain, as iron-rich caves are often generated in the interiors with no visible entrance from the outside.