The Drupal location module does not ship with Canadian postal codes. I've recently had to fix this on two Drupal 6 sites, here is how:
wget http://www.freeformsolutions.ca/en/sites/mediatribe.net/files/downloads/zipcodes.ca.mysql.zip
unzip zipcodes.ca.mysql.zip
drush sqlc < zipcodes.ca.mysql #### takes 10 minutes!!!
rm zipcodes.ca.*