A MTJ is disclosed with a discontinuous Mg or Mg alloy layer having a thickness from 1 to 3 Angstroms between a free layer and a capping layer in a bottom spin valve configuration. It is believed the discontinuous Mg layer serves to block conductive material in the capping layer from diffusing through the free layer and into the tunnel barrier layer thereby preventing the formation of conductive channels that function as electrical shunts within the insulation matrix of the tunnel barrier. As a result, the “low tail” percentage in a plot of magnetoresistive ratio vs Rp is minimized which means the number of high performance MTJ elements in a MTJ array is significantly increased, especially when a high temperature anneal is included in the MTJ fabrication process. The discontinuous layer is formed by a low power physical vapor deposition process.