Take a photo of the package with the Canada Post returned to sender reason and the address both visible.
Contact the buyer and politely explain what happened. Ask them to confirm whether their address is correct. Attach the photo to the eBay message just so the buyer and any eBay CSR who might need to see the message can see it is legitimate.
From there, verify with eBay customer service whether the buyer is still protected. This is important to know, because if you choose to re-send it to a different address and their buyer protection is still valid, that means you lose your seller protection by sending it to a different address than the one on the invoice. While unlikely, this could make it so the buyer can open an Item Not Received case and keep both the item and a refund, even if tracking marks it as delivered.
If the buyer isn't protected, the ball is in your court to do what you think is right or fair. Either refund fully, refund minus the original shipping, re-send at your cost, or re-send at their cost.
If the buyer is still protected, you may have to consider refunding the item and asking that they purchase it again with the correct address. I don't know if you would be able to hold back the shipping cost or not. Although, holding back the shipping cost with a refund may upset the buyer and make them unwilling to purchase the item again.
If this was the fault of Canada Post, and the address was not wrong, I would cover the cost of resending it. I would look at it the same way as if I send someone something and Canada Post destroyed it in transit. Was I the one who crushed the box? No, but Canada Post was working on my behalf so I am responsible for resolving it. There might be an avenue with Canada Post's customer service for you to get the original label refunded, but I am not sure.
