A method for fabricating a longitudinally hard biased, bottom spin valve GMR sensor with a lead overlay (LOL) conducting lead configuration and a narrow effective trackwidth. The advantageous properties of the sensor are obtained by providing two novel barrier layers, one of which prevents oxidation of and Au diffusion into the free layer during annealing and etching and the other of which prevents oxidation of the capping layer during annealing so as to allow good electrical contact between the lead and the sensor stack.