One certainly needs more than 5% U-235, the naturally abundant fissile isotope of uranium, to produce a nuclear weapon. One preferably tries to make the u (in metal form) as close to 100% as possible, but because that is prohibitively expensive 80-90% is usually sufficient.
Natural uranium (from the mine) has about 0.71% U-235, 99.245% U-238, with some U-234. It is used in CANDU Heavy Water Reactors without enrichment, so the Iranian could use CANDUs.
Light Water Reactors (LWRs in the West and Russian VVERs) require enriched uranium). The current licensed limit (i.e. authorized by varies national governments) is 5.0%. Some research reactors use 20% or higher.
The CANDU and LWR fuel is in the form of UO2 encapsulated in long tubes of a Zr-alloy and sealed at both ends. The water coolant serves to cool the fuel and moderate it. The CANDUs use heavy (deuterated) water, so there is less moderation than in LWRs. The LWRs require higher enrichment to overcome the absorption of neutrons by H in the water (deuterium is used in heavy water to avoid this matter).
Anyway - getting back to nuclear weapons. Uranium could be used in gun type similar to Little Boy (http://en.wikipedia.org/wiki/Little_Boy) .
More modern nuclear weapons use an implosive geometry, and preferebly Pu 239, because Pu-239 has a higher cross-section for prompt neutrons and allows a smaller critical mass. Pu-239 is used in 'triggers' for thermonuclear weapons.
Pu-239 is produced by virtue of neutron capture in U-238, which becomes U-239, and then through two successive beta decays becomes Pu-239. Pu then must be separated chemically from the U, purified and formed into a metal of the appropriate geometry.
So far the discussion concerning Iran is focused on the potential to enrich uranium to greater than 5%, which they could do in theory.
For every kg of U-235, one need ~140 kg of natural U. Uranium bearing ores contain about 2-3% uranium or, so one needs tons of ore from which to extract uranium. Iran apparently has its own deposits, so it makes sense for them to develop nuclear power, IF they do it for peaceful purposes.