Ok, I was finally able to test this, but it was tricky to test. I've discovered that Dammon cannot use enriched infernal iron at all. The only infernal iron he can use is the ordinary stuff. To test this, you have to actually sell all the other stuff because it will get used even out of your camp stash if you have any. Once selling all non-enriched, I checked with him, and he no longer offered to build items for me.
