Iron in a furnace with an iron tool repairs 33% durability each ingot.
OR:
Sorry about my editing skills, please don't use that texture for a hammer.
Right clicking an iron block opens another screen, shown below (or something like that)
Hammer takes durability, iron is used and tool is repaired.
I hope you like my suggestion, although it would probably be hard to implement into the game. keep in mind this is only a suggestion page.
