Are you talking about making "magnetorheological fluid"? AKA, the stuff that becomes very stiff when a magnet is held against it (as used in the ferrari f430's dampers).
If so, you are going to kick yourself when i tell you a much easier way to do it.
Put a powerfull magnet inside a plastic bag and rub it through some sand (any sand, even beach sand will do) to collect the iron ore from the sand.
Then mix that with oil. Simple, and much faster to harvest the iron.
Source:
http://sci-toys.com/scitoys/scitoys/mag ... heological
That website has some great stuff on it BTW, i strongly recomend it.
Ferrofluid: Ghetto resources
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SavageLych
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