It's the thermite reaction. It can be quite spectacular. And shouldn't it be Fe2O3 JimBob?
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Put the above two ingredients in a ceramic pot, (maybe add some oxygen rich compound to give a bit mroe fuel but it's not really needed), use a magnesium strip as a fuse (to get the required temperatures), and off it goes. But don't do it inside, from memory the reaction is at about 3500 degrees.
Don't expect to use the pot again either, liquid iron is formed out of this.
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