>Although iron ore is plentiful, it is expensive to refine and smelt

Might explain why the land around the Lonely Mountain was unforested*. This is what happened in ancient Greece -- deforestation largely due to charcoal production for smelting iron. Topsoil got eroded and it still hasn't recovered today. Prior to metallurgy, Greece was densely forested, and must have had some biggish trees, judging by the construction of temples etc.

* IIRC. Also a fire breathing dragon taking up residence probably didn't help.