June 1 (Reuters) - USA Rare Earth said on Monday it will make an additional investment in France that could exceed EUR175 million ($204.03 million) to expand its metal, alloy, and magnet-making capacity.

The company had said in April that it was considering building a magnet plant in France, after agreeing to pay EUR40 million for a stake in French rare-earth processing firm Carester.

The investment would be supported by French government incentives and could also include debt guarantees or a direct equity stake in the company's European unit.

"Magnet making in France is a key goal of the company," USA Rare Earth CEO Barbara Humpton said at a summit in Paris.

The United States and Europe are rushing to establish domestic supplies of rare earths, which are vital for the green energy transition, electronics and the defence sector, and cut their dependence on top producer China.

($1 = EUR0.8577)

(Reporting by Anusha Shah in Bengaluru; Editing by Rashmi Aich and Subhranshu Sahu)