How would people gather, process and then smelt the ore sand? Would they be able to do this industrially and be able to build their economy on it? Would such an economy be good? How would it be like?
We need to address how ore is currently mined, processed, and then forged. This process can be summed up in this article or as follows:
- Dig up the metal in question. You can dig a pit, try to follow the metal vein in shafts, or even pick up trace amounts by letting it sift down through water. The mining technique of choice depends on the metal, its concentration, and other factors, such as the surrounding rock.
- Separate or purify the metal from its ore. Iron Ore, for example, is often not elemental iron. It is usually Hematite or one of many other forms. That's why it often goes to blast furnace, where pig iron is made.
- Refine the metal as needed for whatever purpose it is intended for. This could be including more carbon content to get a specific steel, or introducing gold to silver to make rings stronger, or something else entirely.
As I understand, the Desert of Ore is literally a giant pile of... ore. That makes #1 easy. Get a bucket of ore-sand, and carry it to the refinery. Slaves or other unskilled (or unmotivated?) workers can do that. You may even get really smart and attempt to just work on the sand below your furnace! That being said, you will have to worry about more dense ores sinking as the sands shift and move. Otherwise, I would expect to see a fair amount of stratification.
The second step is the difficult one. Living in a desert, trees and burnable material is difficult to come by. You mentioned, however, that there is magic. Using magic, assuming it has a lower cost than importing wood, would be great to fuel your furnaces. It may even have the side effect of making furnaces hotter than otherwise. I wouldn't know; it's magic!
The third step would be trivial if the second step is solved. Refining metal usually means adding more heat in addition to other things. (Other things can be, say, oil or other sources of carbon.) In the case of carbon being added to iron, it's generally in small amounts that you get useful items.
Supply and Demand, once again, will determine the value of your products. Are the metallurgists and smiths from one group better than the other? Do they know a process (like making Wootz/Damascus Steel), which gives products from one group an advantage over another? Can they trade these goods to people who cannot make them?
The more you answer yes to those questions, the better your economy can be. Like any economy which has a particular specialization, trade would be super important. If that group has what an other group needs, and that other group has what that group needs, they would obviously be super excited to trade with each other.
In a lot of ways, the setting of a desert of ore would not be much unlike economies humans have seen in the past. Indeed, you could have a silk-road situation, except the silk is instead the metals from your Desert of Ore. It could be the road of steel!
The primary problem with industry in a desert environment is that of resources. Obviously, there are many valuable ores that can be harvested, some as simply as shovelling up a wagonload of sand, others may require some pickwork before the shovelling can start. However, that is the least part of the problem.
The primary problem is maintaining a sufficiently large workforce. We have an environment with precious little food or water, so much of these would have to be either carefully husbanded, or imported. Fortunately, there are all these valuable ores lying around, and hopefully, trading partners. This kingdom would most likely be trading metal ingots, or preferably value-added metal goods (this is very important! Never sell off your ores when you can sell jewellery instead, unlike some idiot nations that I wont mention but live in - have a mass-based export duty) that can bring in more money and employ more people, for foodstuffs and livestock.
The secondary problem is energy. Transporting and processing ores requires energy. Much of it could be muscle power (human or animal), fuelled by food, but heat will be required. While often hot, no desert is that hot, so some other heat source may be required. Since a solar furnace is probably out of the question, we would require some sort of fuel. Fortunately, there may be carbon/coal sands that could come to the rescue (those being capable of being described as an ore), so they could be burned for fuel as well as being an oxygen sink in a process such as iron ore refining.
The third problem is building materials. While you may have lots of metals, they can be expensive to work, and stone and wood - if you have it - is easier to work. Expect a lot of stone or brick buildings, since wood would be rare and expensive, and usually imported too.
However, given all these ores lying (or blowing) about, waiting to be picked up, with a bit of ingenuity and effort, a very tidy profit could be made, even with the necessity for imports. I would expect the inhabitants of this region to be very conscious of making the best use of whatever they have (since they have so many scarcities), and they would likely not sell raw metals to outsiders when they could sell finished goods instead. These would likely be clever, disciplined people (since those who were otherwise would be sick or dead from metal toxicity) who would be highly protective of their families and their nation, and would bargain hard at every opportunity.
I can also see that the temptation to be a slave-owning culture would be very strong. Mining some of these ores would be downright dangerous, and the miners might have short lifespans. Criminals and the indigent could be rounded up and made to do these nasty jobs that a decently industrious person would not want to do themselves, which could lead to defeated invaders being enslaved and sent to the mines, and eventually to slaves being imported. In such a case, there would be no beggars. Anyone who could work would work voluntarily, or would be made to work, or if not capable of working and lacking in resources, would starve in short order to the general approval of the populace. There would need to be a fairly powerful cultural counter-pressure to prevent this.
You are setting yourself up for major environmental problems. Most refining requires a lot of heat, which requires wood (unless there are coal deposits or similar). Cutting down trees (not that you'd have many in a desert) devastates the surrounding land: 2500 years later, Greece still hasn't recovered from the mining of the classical period. (Search on Athenian silver mines, for instance.)
For an example closer to our time, forests in much of the western US were cut down for mining & refining: http://parks.nv.gov/parks/ward-charcoal-ovens-state-historic-park/
Many refining techniques also need a good bit of water, which also is rather scarce in a desert.
Bottom line is that your desert dwellers will most likely have to ship the raw or lightly-processed ores out by the wagonload, and will have to maintain roads and food/water supplies for the haulers.
Adding a bit: I think you really need to look into a bit of the background geology & chemistry. I'm a long, long way from being an expert, but I know that there are reason why ores tend to be where they are. For example, many ores are deposited by hydrothermal processes, either deep underground or at ocean vents, and then are uplifted. Iron, oddly enough, is an exception: much of the ore we mine today was produced by microbes in the 'Great Oxidation Event'.
Another way, which really happens in deserts, is leaching of salts from surrounding areas, which are then deposited as evaporites in dry lake beds. This is how lithium is minded in Bolivia & Nevada.
You might get iron ore if an ore bed has been uplifted into a mountain range, then eroded, and the resulting iron sands carried to the desert where they're sorted by winds. Heavy metals like gold aren't going to be moved by wind, but might exist in old stream beds that have dried up, and had the lighter material blown away...
Another point is that a fairly primitive society isn't going to know that much about most metals. Gold & silver, iron, copper, tin, and lead are about it. This wikipedia link might be a starting point: https://en.wikipedia.org/wiki/Metals_of_antiquity