You do have to have special ranks to build a second city, put your mouse over the "Build City" icon to the right of where you'd enter text in chat, in the column where your city is listed.

You can only build on conquered flats though, forests and deserts and all of those are purely bonuses for resource collection. Because you conquered it you will have increased lumber production. Just make sure to recall your troops because they eat more while sitting in a valley.