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We present a theoretical study of the ballistic magnetoresistance in Ni contacts using first-principles, atomistic, electronic structure calculations. In particular we investigate the role of defects in the contact region with the aim of explaining the recently observed spectacular magnetoresistance ratio. Our results predict that the possible presence of spin-polarized oxygen in the contact region could explain conductance changes by an order of magnitude. Electronic transport essentially occurs through spin-polarized oxygen p states, and this mechanism gives a much higher magnetoresistance than that obtained assuming clean atomically sharp domain walls alone.
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