Although the Z-domain precoding method for blind separation of spatially correlated sources is proved reliable in theory, it has disadvantages in its implementation since it requires knowledge of precoder zeros at the receiver beforehand. A new method is proposed in this article to find these precoder zeros and estimate the separation vectors of the coded signals at the same time by exploiting the second order statistics feature of the sources and the Z-domain property of the precoders. Compared with the original algorithm, the new method allows the precoder zeros to change and guarantees less bandwidth consumption. Simulation results illustrate the efficiencies of the proposed method.