SYDNEY/WELLINGTON, Jan 18 (Reuters) - All the homes on one of Tonga"s small outer islands have been destroyed by a massive volcanic eruption and tsunami, with three people so far confirmed dead, the government said on Tuesday in its first update since the disaster struck. With communications badly hampered by the severing of an undersea cable, information on the scale of the devastation after Saturday"s eruption had so far mostly come from reconnaissance aircraft. But the office of Prime Minister Siaosi Sovaleni said in a statement that every home on Mango island, where around 50 people live, had been destroyed, only two houses remained on Fonoifua, and Namuka island had suffered extensive damage. Tonga’s deputy head of mission in Australia, Curtis Tu’ihalangingie, earlier said pictures taken by the New Zealand Defence Force (NZDF) showed "alarming" scenes of a village destroyed on Mango and buildings missing on Atata island, which is closer to the volcano. "People panic, people run and get injuries. Possibly there will be more deaths and we just pray that is not the case," Tu’ihalangingie told Reuters. Sovaleni"s office said a 65-year-old woman on Mango and a 49-year-old man on Nomuka island had been killed, in addition to the British national whose body was found on Monday. A number of injuries were also reported. Tsunami waves reaching up to 15 metres hit the Ha’apia island group, where Mango is located, and the west coast of Tonga’s main island, Tongatapu, the office said. Residents were being moved to evacuation centres as 56 houses were destroyed or seriously damaged on that coast. Atata and Mango are between about 50 km and 70 km from the Hunga Tonga-Hunga Ha"apai volcano, which sent tsunami waves across the Pacific Ocean when it erupted with a blast heard 2,300 km (1,430 miles) away in New Zealand. ASH COVER Satellite images from Sunday show the caldera of Hunga Tonga-Hunga Ha’apai has collapsed and the island has lost a substantial percentage of its initial surface area, said the U.N. Office for the Coordination of Humanitarian Affairs (OCHA). A rescue operation began on Sunday for Atata, which has a population of about 100 people, with an evacuation under way. "Challenges to sea and air transportation remain due to damage sustained by the wharves and the ash that is covering the runways," the PM"s office said. A thick layer of ash blankets the islands, the aerial images provided to Tonga by New Zealand and Australia showed. The archipelago"s main Fua’amotu International Airport was not damaged but the ash was having to be manually cleared from the runway, with the earliest opening being on Wednesday, the OCHA said. As well as the damage locally, scientists say the eruption could have a long lasting impact on coral reefs, coastlines and fisheries in the wider region, as well as causing acid rain. Parts of Peru"s coast were dirtied by oil spilled from a discharge ship rocked by waves caused by the eruption, Peruvian Environment Minister Ruben Ramirez said. read more Clean water sources remain a concern and Tonga"s government has advised people to drink only bottled water as sources may be contaminated with ash, debris and the sea, the OCHA said. The Tongan navy has deployed with health teams and water, food and tents to the Ha"apai islands, with more aid sent on Tuesday, the prime minister"s office said. The NZDF images, posted on Facebook and confirmed by Tu’ihalangingie, showed tarpaulins being used as shelter on Mango, one of the kingdom"s 176 islands. UNDERSEA CABLE Tonga is expected to issue formal requests for aid soon but in the meantime New Zealand said two ships, HMNZS Wellington and HMNZS Aotearoa, had set off with water supplies, survey teams and a helicopter. U.N. teams are on standby, the OCHA said. Australian Foreign Minister Marise Payne said C-130 aircraft from Australia could deliver humanitarian assistance including water purification kits, while the HMAS Adelaide, which would take five days to get to Tonga, was ready to take engineering and medical teams and helicopter support. The PM"s office said some limited communications had been made with satellite phones, but some areas remained cut off. For families waiting for news, the silence was deafening. "The worst fear is always that you"re not going to see the people that you love again," said Seini Taumoepeau, a Tongan-Australian in Sydney who has relatives across the islands. International mobile phone network provider Digicel has set up an interim system on the main island using the University of South Pacific’s satellite dish, New Zealand said. Subcom, a U.S. based private company contracted to repair subsea cables in the Asia-Pacific, said it was working with Tonga Cable Ltd to repair the link that runs from Tonga to Fiji. Samiuela Fonua, the chair of Tonga Cable, said there were two cuts in the undersea cable that would not be fixed until volcanic activity ceased, allowing repair crews access.