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MnZn ferrite coatings fabricated by plasma spray have the advantage of a columnar structure with average grain size between 200-300 nm, somewhat analogous to that of conventional laminated cores used to minimize the eddy current loss at high frequency. The resistivity of these ferrite coatings increases by four orders of magnitude after a simple annealing process at 500°C in air. Our studies reveal that this change is due to oxygen diffusion through the grain boundaries, which results in the oxidation of Fe2+ to Fe3+ and inhibits the "hopping" conductivity effect between Fe2+ and Fe3+. The initial permeability at 100 kHz increases from around 500 to above 1000. This change is believed to be due to the local- and long-range redistribution of Mn and Zn, which improves the soft magnetic properties of the ferrite coatings.